Union Budget 2021-Rs 3.05 trillion Electricity Distribution Reform Scheme

The Union Budget 2021 has provided a second chance to financially suffering power distribution companies (DISCOMS). In Budget 2021, the Finance Minister has announced an outlay of Rs 3,05,982 crore for a revamped reform scheme for the discoms.

Key Points

  • The finance minister announced that a revamped, result-linked scheme (Rs 05 trillion) would be launched for the discoms for five years.
  • The scheme will offer financial aid to discoms for up-gradation of systems, infrastructure creation, feeder separation, the inclusion of prepaid smart metering, etc.
  • The ministers also pointed that consumers should be provided an option to choose the power supplier. A new framework will be prepared to provide options to the consumers to choose their power distribution company.
  • Earlier, Ujjwal DISCOM Assurance Yojana (UDAY) concluded in the financial year 2020 with most of the states failing to meet their set targets.
  • The power supply losses or Aggregate Technical & Commercial (AT&C) losses due to inefficient systems were supposed to decrease to 15% and the average cost-revenue (ACS-ARR) gap of discoms, to zero by FY20.
  • However, as per the UDAY portal, AT&C losses, at present are at 23.9 percent and the cost-revenue gap at 0.53 paisa.

A special loan scheme for the discoms was also announced by the Finance Minister in June 2020 in ‘Atmanirbhar Bharat’ to boost the economy. The outlay of the special loan was estimated at Rs 90,000 crore.