All the state governments have agreed to adopt the Rs 3-lakh-crore revival scheme for power distribution entities, Union power minister RK Singh said on Thursday. Though the states were given a deadline of December 31 to apply for the Centre’s assistance under the scheme, Singh said that most states would submit applications by October-end itself.

As per the design of the scheme, loss-making discoms will have access to the Centre’s funds only after preparing a convincing programme for loss reduction, which has to be approved by the respective state governments.

All the state governments have agreed to adopt the Rs 3-lakh-crore revival scheme for power distribution entities, Union power minister RK Singh said on Thursday. Though the states were given a deadline of December 31 to apply for the Centre’s assistance under the scheme, Singh said that most states would submit applications by October-end itself.

As per the design of the scheme, loss-making discoms will have access to the Centre’s funds only after preparing a convincing programme for loss reduction, which has to be approved by the respective state governments.

Under the scheme to be implemented in the five years through FY26, the Centre will fork out Rs 97,631 crore. The scheme will help the states for strengthening and modernisation of distribution systems. “The idea is to address core issues of billing-collection inefficiencies and pilferage efficiently,” Singh added.

As FE reported earlier, as much as Rs 22,500 crore has been earmarked as the central government grant for the installation of 25 crore smart prepaid meters across the country.

The total outlay for smart-metering under the scheme is Rs 1.5 lakh crore, of which the Centre will provide Rs 900 per meter to the discoms, which comes to around 15% of the cost of these devices. States which are able to install smart prepaid meters before December 2023 will also be eligible for an additional incentive of Rs 450 per meter.

The minister also exhorted the states officials to avail benefits of PM-KUSUM scheme for solarisation of agricultural feeders, which is touted to save money through lower subsidy disbursal to the agriculture sector.

Discoms’ losses were down 38% on year at Rs 38,000 crore in FY20, mainly due to corrective actions like timely tariff revisions and improvement in billing and collection efficiency. The NITI Aayog has estimated the losses in FY21 at Rs 90,000 crore, the power ministry said the the figure is “grossly inflated”.

Industrial and consumer segments traditionally contribute more than 70% of discoms’ revenue, but use about 50% of the overall electricity supplied. On top of that, it was difficult for discoms to continue meter reading exercises and collect payments from consumers amid the lockdown, which had likely widened the gap between their cost of supply and revenue realised (ACS-ARR gap).

The Centre is also implementing Rs 1.35-lakh-crore loan package through PFC-REC to to help dosoms clear the dues to power generators.

The discoms’ losses had declined in FY17 and FY18 thanks to the UDAY scheme launched in November 2015, as governments of 16 states have taken over around Rs 2.32 lakh crore debt of their discoms, resulting in lowering of the interest rates on these loans to 7-8.5% from around 11-12% earlier. Discoms’ losses had surged 83% annually to Rs 61,360 crore in FY19, mainly due to delayed subsidy disbursal by state governments, inefficient billing and tariff collection and inadequate tariff hikes.

Singh had convened a series of regional level meetings with senior state government officials and power ministers on Wednesday and Thursday to discuss the new scheme.