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Recently, the Union and State governments agreed to implement the direct benefit transfer (DBT) scheme in the power sector for better targeting of electricity subsidies.
- Under the scheme, electricity will be provided to consumers at market rates and those eligible get the subsidy amount directly in their bank accounts.
- The cash payment under DBT will be equivalent to the level of payment announced by the state government for per unit of electricity consumption.
- The state would decide the subsidy based on average consumption data of a particular set of consumers.
- It is to be first launched under a pilot project and the full launch by 2019 when state discoms cleared their losses and started generating profit under UDAY.
- To make discoms more responsive, any disruption in electricity will be penalized after March 2019.
- For achieving efficiency and reduce losses, 100% metering will be done and there will be no human interface in consumer sides such as metering, billing, and collections.
Need for DBT in the power sector
- India’s electricity distribution sector has been facing huge loss over the years even after the launch of UDAY (Ujwal Discom Assurance Yojana).
- Currently, discoms provide subsidy by the cross-subsidization method. Cross-subsidization is done by subsidizing the electricity tariff of households while keeping the tariff for commercial and industrial consumers high.
- People who are capable of paying the tariff benefits from cross-subsidization, but people who can’t pay (small business) are affected due to high electricity costs. Hence, DBT would solve the problem by direct targeting.
- India’s per capita power consumption is around 1200 kilowatt-hour (kWh) which is among the lowest in the world. The government has the vision to provide 24×7 power to all by 2019. So power leakage and inefficient distribution shall be minimized with DBT and provide power to all households particularly those who lack.
- In 2016, NITI Aayog recommended launching DBT in power distribution.
- DBT in power sector will result in better targeting of subsidies without any leakages and delays.
- It will result in savings to the government exchequer.
- The tariff rationalization under the proposed reforms would help discoms escape from losses and recover input costs.
- It would result in the development of small industries who were earlier affected by cross-subsidization.
- Unless metering is done at the lowest levels (backward and rural areas), the power sector will not survive.
- DBT is done through Aadhaar. However, the biometric authentication of poor people has not complete.
- There is also the need to remove the ghost beneficiaries.
DBT in the power sector is a welcome move which would help India achieve 24×7 power for all target. However, the implementation should also be effective in ensuring the success of this scheme with proper monitoring, prompt payments, grievance redressal mechanisms for non-payments or delayed payments, removing ghost beneficiaries etc.
Do you think that the Direct Benefit Transfer (DBT) in the power sector would help the government in achieving the 24×7 power for all target? Critically examine.