States should bear the cost of subsidising power: Scindia

Determined to reform the crucial power distribution sector, power minister Jyotiraditya Scindia on Wednesday said states were free to subsidise power but the cost of such subsidies should be borne by them and need not reflect on the balance sheets of state distribution companies.

Determined to reform the crucial power distribution sector, power minister Jyotiraditya Scindia on Wednesday said states were free to subsidise power but the cost of such subsidies should be borne by them and need not reflect on the balance sheets of state distribution companies.

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Speaking to HT in an exclusive interview, Scindia said distribution companies buying and supplying power should be cash neutral. "There is no problem if state governments want to give subsidy but please ensure that the burden of such subsidies should not reflect on the balance sheets of distribution companies."

Many states are seen giving free power but the losses suffered by distribution companies on account of this practice are not being compensated from the state governments’ coffers, which has led to a financial mess for these companies, he said.

“We (Centre) are running many social schemes but this is done on the balance sheet of either the public sector units (PSUs) or government departments,” he added.
The central government recently announced a R1.9 lakh crore financial debt restructuring package to revive various state distribution companies that have been reeling under the burden of subsidies given by the state governments. However, the release of funds to revive these distribution companies is subject to a set of reforms that has to be undertaken by the states. With Scindia’s continuing efforts, most states have come on board and discussions with the remaining few are progressing well.

Asked as to when the disbursal of this R1.9 lakh crore will begin, Scindia said, “We have most states on board barring two to three states, which are currently negotiating with their bankers based on the transitional financing mechanism that I have succeeded in clinching with the RBI and the finance ministry. The moment these discussions are over, we will start disbursing the money.”

Alongside, in what could come as a major breakthrough for India’s power sector, the empowered group of ministers (EGoM) on gas allocation and pricing, expected to meet shortly, is likely to accord a matching priority status to power projects along with that of fertiliser plants when it comes to allocation of gas.
“My focus is to see that the power sector gets an equal priority as fertiliser plants when it comes to allocation of gas,” said Scindia. “A final decision will be taken by the EGoM at its next meeting.”

At present, gas-based fertiliser plants get top-most priority in allocation of gas followed by LPG extraction units and gas-based power plants. Most of the gas-based capacity in the power sector is currently stranded for need of adequate gas supply.