Dr A.K. Verma

“UDAY is the most phenomenal and comprehensive power sector reform across the globe”

The power sector in the country has made tremendous progress over the past few years, especially in the generation and transmission segments. The central government is currently focusing its attention on reforming the distribution segment. Ministry of Power’s Dr A.K. Verma spoke about the government’s initiatives at a recent conference organised by India Infrastructure. Excerpts…

The electricity sector plays a key role in ensuring economic growth. In recent years, the elasticity of electricity demand with respect to economic growth in India has declined from 1 due to the changing composition of the economy. However it continues to remain substantial at 0.7.

Today, we have achieved a surplus in electricity generation. There is a very ambitious plan of adding 175 GW of renewable energy generation capacity. More than 50 GW of thermal generation capacity is already at different stages of construction. The performance of the transmission segment has also improved significantly. Except for the southern corridor, there is no transmission congestion. Over the next couple of years, we expect to add another 18,000 MW of interregional transmission capacity.

Reforms in the power sector are mostly focused on the efficient management of the distribution segment. At present, most discoms are reeling under financial and operational losses. We have estimated that aggregate losses of discoms across the country were Rs 500 billion in 2015-16.

After several attempts at the financial restructuring of discoms, the government came up with the Ujwal Discom Assurance Yojana (UDAY) in 2015. It is the most phenomenal and comprehensive power sector reform across the globe. UDAY focuses on both the financial and operational turnaround of discoms. The target over the next three years is to reduce the gap between average cost of supply (ACS) and average revenue requirement (ARR) to zero, as well as to reduce average technical and commercial (AT&C) losses to not more than 15 per cent.

So far, 16 states have signed MoUs for joining UDAY, while seven states and one union territory have indicated their willingness to do so. The details of joining UDAY are being worked out with two-three other states as well. I think within a short span of time, UDAY will cover the entire country.

Prior to UDAY, we started two flagship schemes in December 2014 for strengthening distribution infrastructure. These are the Rs 440 billion Integrated Power Development Scheme (IPDS) for urban areas which subsumed the Restructured Accelerated Power Development and Reforms Programme and the Rs 320 billion Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) for rural areas which subsumed the Rajiv Gandhi Grameen Vidyutikaran Yojana.

Rural electrification under the DDUGJY is a key priority area. On August 15, 2015, the prime minister had announced the target of electrifying all villages within 1,000 days. As on April 1, 2015, we had 18,452 unelectrified villages, of which we have already electrified 9,477. A large-scale impetus is also being given for household electrification under various programmes. Below poverty line consumers are being provided with free connections. The target is to extend our system such that connections are provided on demand. Under DDUGJY, we have also included a component of feeder separation to enable rostering of agricultural power which will ensure adequate supply of quality power to farmers. The government has also created documents under the 24×7 Power for All initiative, in close collaboration with state governments.

Positive results from these efforts are already visible. The Chhattisgarh utility has reported a financial turnaround. Provisional data from other states indicates a declining trend in AT&C losses and a reduced ACS-ARR gap. Overall, the cost of power purchase is also declining due to efforts like swapping and rationalisation of coal linkages, the control of grade slippages and price rationalisation.

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