Three states to start power sector reforms.

The National Democratic Alliance (NDA) government has started the process of setting the power sector right, with Goa, Uttarakhand and Meghalaya taking the lead in joining hands with the Centre. Besides regular rate increases and debt restructuring to clean up their books, these states will also initiate schemes to enable 24x7 power supply to consumers, at a cost of Rs 7,563 crore.

Unlike the United Progressive Alliance government’s financial restructuring plan for distribution companies, the NDA government’s programme will have no grant from the Centre to incentivise reduction in debt and losses. The Centre is pursuing states to tackle these issues by increasing rates and raising funds from the market. Budgetary support from the Centre would be solely for its flagship schemes — the Deendayal Upadhyaya Gram Jyoti Yojana and the Integrated Power Development Scheme.

Till FY19, the overall requirement of funds for Uttarakhand will be Rs 4,854 crore, Meghalaya Rs 2,553 crore and Goa Rs 1,576 crore. Any shortage will be met through external/market borrowings from financial institutions or developmental aid agencies, which the state concerned will facilitate.

The door to central funds, however, won’t be completely shut. “The state can ask for financial support but only when its generation, transmission and distribution utilities abide by the respective state electricity regulatory commission,” said a statement following the signing of agreement with the three states.

Earlier, CRISIL had prepared a report on state utilities and suggested measures to reform the system. It had proposed rate increases of 1.7 per cent for Uttarakhand, 11 per cent for Goa and 15 per cent for Meghalaya from the next financial year.

BS