Finance Commission Meets Power Minister, Discuss Reforms in Electricity Sector in States

The 15th Finance Commission on Friday held a meeting with Power Minister R K Singh and ministry officials on reforms in the electricity sector in states.

During the meeting, Singh highlighted to the commission the current disconnect in the structures of the power system between decision making by the state government and the financial consequences thereof, which are borne by the discoms, leading to losses, an official statement said.

The minister emphasised the need for state governments to be also responsible for the financial health of their fully-owned distribution companies (discoms), it added.

Towards this end, the borrowing limits of the state governments under the FRBM Act needed to be recalibrated to take these liabilities into account, it said.

Singh said this would bring to the fore the responsibility of the state governments under whose control the discoms operate.

"It will also bring financial transparency and bring about financially and managerially responsible behaviour of the States with respect to DISCOMs," the statement added.

The meeting of the Finance Commission, headed by N K Singh, with power ministry officials was in continuation to the recommendations made on the power sector by the Finance Commission in its report for the financial year 2020-2021.

Finance Minister Nirmala Sitharaman had recently announced Rs 90,000 crore liquidity injection for discoms as part of steps to support the coronavirus-hit economy.

During the meeting, Singh briefed the commission about the reforms in the pipeline for the turnaround of discoms."This included the new tariff policy which is under consideration for approval, reforms in the power sector as well as amendments proposed to the Electricity Act of 2003."

The minister informed the commission that the old schemes of the ministry are being amalgamated into a new scheme for which he requested Rs 3 lakh crore over a five-year period.

"This scheme would primarily focus on steps for reduction of losses, separate feeders for agriculture and smart pre-paid meters," the statement said.