India’s ambitious bailout plan for state government-owned electricity distribution companies (discoms) announced in September 2012 has turned out to be a non-starter.
Most of the eight states that together accounted for more than 80% of accumulated distribution losses and which had opted for the bailout have failed to meet the requisite performance criteria.
As a result the country is staring at a fresh electricity crisis in the face; if unaddressed, this could potentially nip the economy’s revival in the bud.
According to government documents reviewed by Mint, the states will be unable to turn around the fortunes of their electricity boards as required by the financial restructuring plan (FRP) finalized in September 2012 because of reasons such as low tariff increases, slow progress in reducing losses, higher electricity purchase costs and crippling debt (the states have been unable to bankroll the debt as they do not have the fiscal space to do so). Read more