State power distribution companies will have to hand over electricity supply businesses to multiple licensees or franchisees to get central government assistance or loans from the Power Finance Corporation, said power and renewable energy minister RK Singh. This will give consumers the option of choosing from multiple electricity service providers like mobile number portability even before the Electricity Act is amended and quality of supply improved, he told ET’s Sarita C Singh in an exclusive interview.

The minister said the Centre withstood pressure from states to get all discoms to open bank guarantees against power purchases. Edited excerpts:

You have been talking about conditional package to power distribution companies…
Every five to 10 years, investment is made in strengthening distribution systems. The Centre gives money, but after that the system is not maintained. . If the discoms are not viable, the sector will not be viable because that is where the money comes from. They are not viable for three reasons – theft, inefficiencies in billing and collection, non-payment of bills and subsidies by state departments.

The first step, which was necessary, was conveying that power is not a free commodity. So we mandate maintaining of letters of credit (LC) against power purchases. We are proposing that if states are announcing subsidies, they have to give direct benefit transfer into the accounts of consumers.

For tackling inefficiencies in metering, billing and collection, we want deployment of smart prepaid meters in the next three years.

For theft, we propose giving part assistance to notorious states for setting up aerial bunch cables or underground cabling and setting up specialised police stations on power pilferage.

One more thing which I am doing is that earlier there used to be separate schemes for system strengthening and separate schemes like Ujwal Discom Assurance Yojana for loss reduction. I am combining all and making assistance conditional. So, the loss reduction trajectory will be set and we will release money only when you fulfil that benchmark. The loans from Power Finance Corp and REC Ltd will be sanctioned only when the benchmarks are met. It has to be a complete package. The package will also require the distribution companies to have multiple power distribution licensees or supply franchisees in a particular area. So, in every area, consumers will have options to choose from.

The wire business will remain with the discoms and it will charge wheeling charges. The franchisees will be appointed through bidding on commission basis. This can be done without amending the Electricity Act.

The power ministry’s order to discoms to open letters of credit in favour of power plants has been implemented by all states from August 1. Was there pressure from states to withdraw it, and how many aberrations were reported?
I will not name, but some chief ministers asked for more time. We said no. But they implemented it and now this has become part of the system. No power curtailments were required, barring a few in some states.

The LC order will ensure that there is no increase in discom dues. But how will you recover the already accumulated dues?
The proposed Tariff Policy will mandate discoms to pay on a first-infirst-out basis so the dues get cleared. It also provides that any late payment will attract late payment surcharge and even generators cannot waive it.

Andhra Pradesh CM YS Jagan Mohan Reddy has written to PM Narendra Modi indicating that renegotiation of renewable energy power PPAs is inevitable as state finances are in precarious position…
He met and submitted a letter to the Prime Minister complaining that there have been malpractices and he gave examples of some firms. That letter was referred to us and we are examining the matter. Once you have signed agreements, you have to abide by them.