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Scindia favours 'carrot and stick' policy for power discoms

Last Updated: Sunday, May 12, 2013 - 12:48

New Delhi: In a 'carrot and stick' approach to deal with the power distribution companies, Union Minister Jyotiraditya Scindia has suggested incentivising the discoms that cut down losses from theft and other transmission issues while punishing the bad performers.

"If one discom is a better performer, then why it should get loans at the same level of those availed by a poor performer. The benefits should be on the basis of performance and creditworthiness of a discom," Scindia said.

Terming high Aggregate Technical and Commercial (AT&C) losses as a major bane for the power sector, the Minister told PTI in an interview here that "the discoms cutting down the AT&C losses at a faster rate need to be rewarded and that would happen".

"I want AT&C losses to come down. I'm telling the discoms that I will give you an incentive if you are able to bring down the AT&C at a faster rate," Scindia said.

"You got to have a carrot and stick approach. For those people who are coming on to that pathway (of lowering the losses), we will incentivise them. Otherwise, there is no long term solutions for the problems of the sector," he warned.

The minister said that even one rupee of investment in generation would be of use only after the entire value chain, including distribution and transmission, becomes viable.

"All problems require unique solutions. 'One size fits all' does not work," he said.

Talking about the issues faced in the power distribution segment, Scindia said one of the major issues here was the financial stability of discoms.

"For this, we have come out with the FRP (Financial Restructuring Package). It addresses short-term liabilities of state discoms in Bihar, Andhra Pradesh, Rajasthan, Karnataka, Tamil Nadu, Himachal Pradesh, Uttar Pradesh and Haryana.

"These eight states are already on board and we are talking to other 2-3 states and close to Rs 1,40,000 crore out of the total short-term liabilities of Rs 1,90,000 crore would be addressed through the FRP.

"The transitional financial mechanism has been approved by the Finance Ministry, which will help the discoms avail loans at lower rates to make the FRP viable in the long term. We have already issued the guidelines and the state governments are now negotiating with their individual banks to get them on board," he said.

Scindia said that the Ministry has already launched a programme for grant of credit ratings to discoms and he would make it a semi-annual exercise going forward.

"The ratings are being given, so that when banks go to fund these discoms, they do it on the basis of transparency.

"I would like to first make it an annual exercise and eventually a semi-annual exercise, so that there is rigour, transparency and accountability in the system and the discoms start competing with each other," he said.


First Published: Sunday, May 12, 2013 - 12:48
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