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ICICI Securities Report
The Union ministry of power has issued a memorandum providing details on the revamped, reforms-based and results-linked distribution sector scheme for supporting discoms to undertake reform and improve performance in a timebound manner, as announced in the FY22 Union Budget.
The scheme is aimed at providing 24x7 uninterrupted, quality, reliable and affordable power supply and seeks to improve discoms' operational efficiencies and financial sustainability based on state-specific action plans.
Total outlay for the scheme is Rs 3,038 billion over FY22-FY26.
It is implicit in the scheme that discoms that are not able to reform and plug losses will have to give way to privatisation (delicensing is proposed in the draft Electricity Amendment Bill), since states don't have enough fiscal space to keep funding power sector losses.
We believe results from implementation of this scheme will positively impact the entire value chain, revive capex and rerate the sector
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