THE GIST of Editorial for UPSC Exams : 13 September 2019 (The Power play (Mint))

The Power play (Mint)

Mains Paper 3: Economy
Prelims level : Ujwal DISCOM Assurance Yojana
Mains level : Reforms in Power Sector

Context

  • In a welcome move, public sector companies NTPC and Power Grid Corporation of India have formed a joint venture to set up a national electricity distribution company.
  • The decision paves the way for a central public sector entity to enter the power supply business, which up until now has been largely the preserve of state distribution companies.
  • Coming at a time when state discoms are struggling to contain their losses, the move is likely to have far reaching ramifications for the distribution segment.

Background

  • Over the years, successive governments have tried to address issues plaguing the power distribution segment, but in vain.
  • The segment is the weakest link in the power chain, and its poor health affects the entire power sector.
  • In 2015, the NDA government had launched the Ujwal DISCOM Assurance Yojana (UDAY) to turn around the fortunes of beleaguered state discoms.
  • But almost four years later, discoms continue to struggle, plagued by a host of issues ranging from inadequate tariff hikes, to high aggregate technical and commercial losses, inadequate and untimely subsidy disbursements, among others.
  • Their flagging fortunes have not only affected power generation companies, but have also caused stress in the banking sector.
  • The creation of a national electricity distribution company, which also serves as a central electricity buying agency, could potentially address several of these issues.
  • It could bring relief to power producers, bring stranded capacity back to life, ensure timely payment and address the issue of stressed assets in power generation.
  • The new entity could also procure electricity at competitive rates, the benefits of which could then be passed on to end consumers.

Implications from this move

  • The move to create such an entity also signals the possibility of another round of reforms in power distribution, especially the separation of content and carriage: Carriage refers to distribution, while content refers to electricity supply.
  • Separating them would allow consumers to buy electricity from a power company of their choice.
  • In a market that is currently characterised by geographical monopolies, this would help usher in competition.
  • Such measures along with the creation of a national distribution company also raise the possibility of rationalising the power tariff structure across the country.
  • Currently, the power market in India is highly fragmented. Different state discoms charge different tariffs to different customers.

Conclusion

Prelims Questions:

Q.1) What is CORAS, recently seen in news?
A. A separate Commando Unit of Railway Protection Force (RPF).
B. An international organization set up to promote democracy.
C. An active composite volcano on the east coast of Sicily, Italy.
D. A nano satellite designed and developed indigenously by Sri Lanka.

Answer: A
Mains Questions:

Q.1) How the creation of national electricity distribution company could help turn around the power distribution segment? Comment.