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India Needs Urgent Power Distribution Reforms: World Bank
Jul 18, 2014

A World Bank report has said that electricity distribution in India needs reform to achieve the target of electricity to all by 2019. Power distribution in India needs sweeping reforms if it is to bring back the country to a high growth trajectory and meet its goal of expanding access to electricity to all by 2019.  

The report titled More Power to India: The Challenge of Distribution pointed out that India's annual per capita power consumption at around 800 units is among the lowest in the world, and the World Bank called for more private participation in the distribution. It has identified electricity distribution to the end consumer as the weak link in the sector.

The study analyzes the multiple sources of weakness in distribution and identifies the key challenges to improving performance in the short and medium term. It recommends freeing utilities and regulators from external interference, increasing accountability and enhancing competition in the sector to move it to a higher level of service delivery.

The report said, “Total accumulated losses in the sector stood at $25 billion in 2011 concentrated among discoms, state electricity Boards (SEBs) and state power departments. Revitalising the power sector by improving the performance of distribution utilities, and ensuring that players in the sector are subjected to financial discipline is the need of the hour. By tackling the losses through a focused approach, it should be possible to make a marked difference in sector performance.”

According to a Moody's report, of all impaired loans at public-sector banks, 20 percent are of distribution companies (discoms), with the proportion going up to 48 percent at some of the most exposed banks.

The erstwhile UPA government had approved the restructuring of Rs.190,000 crore debt of state electricity boards in a move to turn around the finances of power distribution companies. Under the scheme, 50 percent of the short-term outstanding liabilities would be taken over by the state governments and the remainder would be restructured by providing a moratorium on the principal and most favourable repayment terms.

Currently Delhi, Mumbai, Kolkata, Surat and Ahmedabad and the state of Odisha have privately owned discoms. 


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