Centre Plans New Debt Restructuring Scheme For Power Distribution Utilities

In a bid to address the chronic financial woes plaguing India's power distribution companies (discoms), which are saddled with debts exceeding ₹7.4 lakh crore, the Group of Ministers (GoM) on Tuesday discussed a new reform-based scheme for debt restructuring during its fifth meeting chaired by Union Minister of Power Manohar Lal.

The utilities, often state-owned, have long battled inefficiencies, subsidy delays, and high aggregate technical and commercial (AT&C) losses, leading to a vicious cycle of borrowing and operational deficits despite previous initiatives like the UDAY scheme in 2015 and the ongoing Revamped Distribution Sector Scheme (RDSS).

The Ministry of Power stated that the GoM reaffirmed its commitment to bolstering the financial viability of discoms through targeted measures. Discussions centered on the pivotal roles of state governments and regulators in enforcing cost-reflective tariffs, ensuring prompt subsidy disbursements, and facilitating timely payments from government departments. Participants also outlined the broad framework for the proposed restructuring scheme, aiming to alleviate immediate debt burdens while embedding sustainable reforms to prevent recurrence.

Beyond debt relief, the meeting addressed accelerating smart metering deployments and leveraging data analytics for better power purchase optimization and demand forecasting. Minister Lal stressed the need for collaborative action among the central government, states, and regulatory commissions to drive sector-wide reforms. He particularly urged the swift rollout of prepaid smart meters in all government establishments to curb pilferage and enhance revenue collection.

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Power Secretary Pankaj Agarwal underscored the urgency of irreversible reforms to restore discoms' health and avert future debt traps. He noted that the GoM, formed specifically for this mandate, will pinpoint essential interventions to ensure long-term stability in the power sector, which is critical for India's energy security and economic growth.

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