State power distribution companies in India continues to make losses despite multiple bailouts. In this context, do you think privatization of discoms – a possible solution to the existing issues? Comment. (200 words)
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IAS Parliament 7 years
KEY POINTS
· While the government’s Ujjwal Discom Assurance Yojana (UDAY) scheme seeks to reduce discom losses, there is hardly any impact on their financial status.
· Discoms continue to face power theft, billing inefficiencies and regulatory delays in tariff increases, resulting in financial losses.
Arguments favouring
· Operational autonomy
· Profit motive will create a more efficient value chain
· The private sector’s ability to strategize and plan for the long term is essential in an area like power distribution.
· It would bring in competition in the sector and help consumers get quality power at cheaper rates.
Arguments against
· Private companies will prefer to take distribution of power only in urban areas where the income would be more.
· This result in a lopsided market scenario, where the profitable urban centres would go into the hands of private companies, while the loss-making or less income generating villages remaining with state-owned discoms. This will throw the discoms into financial crisis.
· Distribution privatization continues to face scepticism due to mixed results in the past.
· This is evident from Odisha, where all the private power distribution companies are now back in government hands.
· The experience of the franchise and parallel licensing in Mumbai and privatization of power distribution in Delhi are also not encouraging.
Shankaranand 7 years
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IAS Parliament 7 years
