Power reforms won't electrify the sector

Context: The measures suggested in the recent stimulus package by themselves are good for the sector, but they fall short of providing immediate relief. 

Government steps towards power sector:

• Sustainability of sector: State governments loans would be provided through Power Finance Corporation to distribution companies (DISCOMS) for clearing their outstanding due to generators.

• Downside: it is financing of revenue expenditure, which may end up as NPA if the operational efficiency of the DISCOM does not improve.

• Promotion of Industry: Through privatization of power departments in UTs as out brings profitability and efficiency. 

• Consumer rights: Provisions of compensations to be given by the DISCOMS for unwarranted load shedding, progressive reduction of cross-subsidies, using DBT for subsidy payment and use of smart meters.

Govt. falling short:

• No immediate relief : to the problems like sharp reduction in revenue for DISCOMS and scheme designed to specifically help generators and not DISCOMS. Thus, insolvency of DISCOMS remain.
• Same old measures: These measures were already put forth in Tariff policy in 2018. Also, loss was faced at 15% as opposed to national average of 20%, thereby leading to losses for states.
• Compensation payment: May not be feasible in certain geographical areas where load shedding is undertaken to reduce the total losses.
• Rise in tariff: Due to reduction of cross-subsidy , there would be quantum jump in retail tariff for agriculture and domestic consumers.

Way Forward :

• DISCOMS need a traditional finance since revenue collection is dipping and there is no hope for improvement in near future.
• Privatization is a long-drawn-out process should be supported since it is the only way to turn power sector around.