COVID-19 Economic Stimulus and State-level Performance of Power Distribution Companies

As part of the COVID-19 economic stimulus package, the Government of India increased the borrowing limit of the states from 3% to 5% of the gross state domestic product. The power sector reform at the state level is one of the criteria to avail this extra borrowing. The efficiency parameters of the power sector are analysed here, and it is observed that there are statewise differentials in the financial and operational parameters. The average aggregate technical and commercial losses that should have been 15% by 2018–19, presently, on average, stand at 26.15%. The average cost of supply–average revenue realised has also widened. The operational parameters indicate widening inefficiencies across states in the power infrastructure.

The authors are grateful to Pinaki Chakraborty for his valuable comments.

Against the backdrop of the unprecedented impact of the COVID-19 pandemic on the economy, the government introduced a stimulus package under the Atmanirbhar Bharat scheme to revive economic growth and make the country self-reliant (Press Information Bureau 2020a, 2020b). In the last tranche of the stimulus package, the government increased the borrowing limit of the states from 3% to 5% of the gross state domestic product (GSDP). However, this extra borrowing power is linked to promoting specific state-level reforms, including power sector reforms and other performance indicators.¹ The power distribution reform criterion reflects the challenges that the power infrastructure sector faces.

Since 2014, the government has taken several measures to improve power distribution companies (DISCOMs) that have been incurring losses. In the Union Budget for 2021–22, the finance minister announced that DISCOMs would be privatised. To put the matter in perspective, the Government of India (GoI) had launched the Ujwal DISCOM Assurance Yojana (UDAY) in November 2015 with the objective of “Power for All.” Since then, the states have joined it at different times, and so far, 27 states and five union territories (UTs) are part of this scheme (except Odisha, West Bengal, Chandigarh, and Delhi). This ambitious project aims at improving the health of state DISCOMs by improving their “financial” and “operational” efficiency parameters. This article analyses these parameters as per the data available on January 2021.