The government of Rajasthan in India seeks to improve the performance of its electricity distribution sector under the state’s 24/7 Power for All programme.
To this end, the government has successfully secured a $250 million development policy loan in support of this programme from the World Bank.
The Second Programmatic Electricity Distribution Reform Development Policy Loan for Rajasthan is the second in the series of two operations planned for a comprehensive turnaround of Rajasthan’s electricity distribution sector. The first loan closed in March 2017.
The electricity distributors (DISCOMs) in Rajasthan provide electricity to about 9.5 million customers. Read more: India sets high ambitions – 100,000MW solar PV investment
However, a combination of high generation costs, inefficiencies in the distribution sector and an accumulation of long-delayed tariff adjustments has resulted in several years of continuing losses for the DISCOMs leading to a total outstanding debt of Rs 780 billion ($11 billion) as on July 2015.
In its second phase the operation will deepen the institutional and operational reforms that were launched in late 2015 centred around the government of India’s (GoIs) Ujwal DISCOM Assurance Yojna (UDAY), which Rajasthan joined in 2016.
The programme is envisaged will improve the credit worthiness of DISCOMs to support the government’s goal of providing electricity access to all households, improve service delivery, and enable private investment of renewable energy.
Improving electricity distribution sector
The key areas that the programme will support include:
- Strengthening governance in the distribution sector in the state by establishing annual performance MoUs between the DISCOMs and the state government;
- Putting in place a performance management system;
- Providing incentives to employees for improving performance;
- Financial restructuring and recovery in the sector by transferring considerable amounts of the DISCOMs debt to the state;
- Bringing in more discipline in the revenue requirements of DISCOMs;
- Taking initiatives in reducing the costs of energy procurement;
- And improving the operational performance of the DISCOMs through initiatives like publishing feeder level energy audits, increased usage of IT etc.
“The electricity distribution sector in Rajasthan has taken number of initiatives over the last few years that have helped in improving the operational and financial health of the DISCOMs, noted Rohit Mittal, senior energy specialist and Frederico Gil Sander, lead economist of the World Bank and task team leaders for the operation.
They also noted that: It is important that the DISCOMs continue to focus on improving operational efficiency, consumer engagement and transparency in the sector among other initiatives to continue the positive trend in performance and steer the electricity distribution sector on a path to sustainable recovery.”
The loan, from the International Bank for Reconstruction and Development, has a 3-year grace period, and a maturity of 21 years.