The Indian Power Ministry has been working on alleviating the poor financial condition of the distribution companies (discoms) in the country. The move could prove to be a critical one for the solar power sector, according to experts.

Piyush Goyal, the Energy Minister recently announced a proposal to provide permanent solutions for the debt-ridden discoms operating in the country and said it would be presented to the Union Cabinet soon. The plan is to help the discoms clear bad loans worth USD 61 billion and bring their liabilities down.

Their poor financial health has long been a concern within the industry and is often cited as a major hindrance to the solar sector in the country since it translates into unwillingness to take on solar power projects. According to Jasmeet Khurana, senior consulting manager at solar analyst firm Bridge to India, said: “Improvement in the financial health of state level power distribution companies is critical if India’s solar mission has to succeed.”


Source: The Hindu

Previous bailout packages have not been able to produce desired results, which calls for more accountability from states on expected power reforms. For instance, the UPA government’s Financial Restructuring Plan for discoms failed to create any waves. As for the government’s latest bailout plan, this is what Khurana had to say, “Except from some concerns from the lenders, we have mostly heard the right kind of noises about the current bailout package. We are waiting to see the final contours of this proposal. The first priority should be to reduce leakages and inefficiencies in power distribution at the state level. Beyond that, states will also need to raise power tariffs for consumers.”

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