Monday, September 14, 2015

Restructuring loan without Discoms Business Process Re-engineering is a doomed Idea

With a three-year government rescue package coming to a close, the highly indebted state of Rajasthan is getting tough - it's demanding farmers start paying for their electricity.

In a country where rural communities have become used to free power, the state that is home to some 70 million is tasking private firms with running power distribution in its big cities as it tries to recoup what it's owed.


Restructured power distribution debts alone amount to a quarter of Indian banks' problematic loans, and Rajasthan's state-run utilities owe about Rs 61,000 crore, with some Rs 3,000 crore due by end-March. While Rajasthan dropped an earlier plan to actually raise existing tariffs after opposition from farmers.



With these debt levels echoed across the country, Indian states have little choice but to find ways, extreme or otherwise, to face up to a long-ignored problem. Bad debts aren't just threatening banks - with electricity utilities central to the problem, Prime Minister Narendra Modi's electoral promise of power for all could be jeopardised.


The Reserve Bank of India (RBI) warned in June that the risk of states failing to repay loans on time was "very high", as a three-year rescue package launched in 2012 comes to an end - the source of Rajasthan's urgency on collecting fees for electricity. And the central government has identified the power utility sector as critical to solving banks' bad debt problems.


States who cannot pay banks what they owe over the next few years could be forced to turn to the central government for help, putting pressure on India's consolidated fiscal deficit. The centre has ruled out a rescue package along the lines of the 2012 scheme launched under the previous government.


The responsibility under the federal system for reform lies with states - all with different appetites for change, and for pursuing villagers who fail to pay.


Decades of mismanagement and political meddling have left utilities selling electricity below cost and turning a blind eye to rampant theft. The result is state distributors are sitting on $66 billion (nearly Rs 4.38 lakh crore) worth of debt, according to rating agency CRISIL, double the level four years ago.


Rajasthan's drive to collect payments from farmers and call in private firms to help run power distribution replicates reforms made a decade ago in PM Modi's home state of Gujarat. Distributors there are now largely profitable, and power is reliably available across most of the state.


But reform has proved tough and not all states are willing to take difficult steps. In largely agricultural Uttar Pradesh, farmers pay a fixed fee for unlimited power, equating to about one rupee per unit of electricity, a sixth of the generation cost. The state power company's finance director says it has no plans to raise prices to close that gap.


Monday, June 29, 2015

Integrated Power Development Scheme (IPDS)

The Prime Minister Shri Narendra Modi will be soon launching Integrated Power Development Scheme (IPDS).He would launch the Integrated Power Development Scheme (IPDS), a flagship project of his government which aims at strengthening sub transmission and distribution network in the city along with 100 per cent metering facility. 

The IPDS is one of the flagship programmes of the Ministry of Power and will be at the core attempt to ensure 24x7 power for all. The Scheme, announced in the Union Budget 2014-15, aims at strengthening of sub-transmission network, Metering, IT application, Customer Care Services, provisioning of solar panels and the completion of the ongoing works of the Part -A of the Restructured Accelerated Power Development and completion of the Reforms Programme (R-APDRP). R-APDRP has now been subsumed in IPDS and the program would be extending to smaller towns as well. The focus of IPDS is strengthening of sub-transmission and distribution network, metering of distribution transformers /feeders /consumers and IT-enablement of distribution sector and strengthening of distribution network in the urban areas.
Government of India will provide budgetary support of Rs. 45,800 crore over the entire implementation period of IPDS. Out of the total amount Rs 1,067 crore has been sanctioned for Uttar Pradesh including Rs 572 crore for Varanasi. The Project envisages converting area overhead lines into underground cabling in the areas around the temples and ghats in the Varanasi city. The Scheme includes upgradation of the electrical assets at Sub – centers, lines and distribution transformers, capacity enhancement and renewal of the old sub – stations and installation of roof-top solar panel in government buildings. IPDS will help in reduction in AT&C losses; establishment of IT enabled energy accounting / auditing system, improvement in billed energy based on metered consumption and improvement in collection efficiency.
The Scheme is being launched from Varanasi for which Rs 574 crore has been allocated. The sector’s key financier Power Finance Corporation would prepare the detailed project report (DPR). The state government would then either bid the project or nominate agencies to execute the same as per the DPR.
Note: 
The following are major differences between IPDS and earlier schemes for urban distribution sector:
a. Unlike earlier distribution scheme for distribution strengthening like R-APDRP which was limited to towns with 30000 or more population (10000 or more for special category states) as per Census 2001 IPDS covers the complete urban area of distribution utilities.
b. Unlike R-APDRP scheme , where conversion of loan into grant was extended upto 50% maximum and 90% max (for spl cat states) subject to reduction in AT&C loss , IPDS provides 75% max ( 90% max for spl category states) (incl 60% upfront ( 85% for spl cat states) with additional grant linked to achievement of milestones prescribed under the scheme.


References..
http://www.apdrp.gov.in/Forms/Summary_Sanctioned_Projects_Part_A