[Burning Issue] DBT in the Power Sector

Why in News

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.

Key features

  1. Under the scheme, electricity will be provided to consumers at market rates and those eligible get the subsidy amount directly in their bank accounts.
  2. The cash payment under DBT will be equivalent to the level of payment announced by the state government for per unit of electricity consumption.
  3. The state would decide the subsidy based on average consumption data of a particular set of consumers.
  4. 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.
  5. To make discoms more responsive, any disruption in electricity will be penalized after March 2019.
  6. 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

  1. India’s electricity distribution sector has been facing huge loss over the years even after the launch of UDAY (Ujwal Discom Assurance Yojana).
  2. 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.
  3. 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.
  4. 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.
  5. In 2016, NITI Aayog recommended launching DBT in power distribution.


  1. DBT in power sector will result in better targeting of subsidies without any leakages and delays.
  2. It will result in savings to the government exchequer.
  3. The tariff rationalization under the proposed reforms would help discoms escape from losses and recover input costs.
  4. It would result in the development of small industries who were earlier affected by cross-subsidization.


  1. Unless metering is done at the lowest levels (backward and rural areas), the power sector will not survive.
  2. DBT is done through Aadhaar. However, the biometric authentication of poor people has not complete.
  3. There is also the need to remove the ghost beneficiaries.

Way forward

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.

Practice questions

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.

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vivek kumar
vivek kumar
5 years ago

I think this is a welcome move just like what happened when the gas subsidy was made to be transferred directly to bank account of the consumer, hence ghost beneficiaries will not be able to get the subsidised gas. In the case of LPG the gas , the subsidy was asked to be given up by people who were able to afford unsubsidized LPG. In this case also later this can be done government can ask people to give up their subsidy hence , there the government will gain more revenue from electricity. Also by 100% metering the stealing of electricity will stop to great extent and only the poor , who deserve the subsidy will get the subsidy. This is my opinion , I may well be wrong because of my possibly wrong understanding.

5 years ago

Though this will definitely help eliminating theft and ghost beneficiaries, I do not understand how this can help small businesses. Someone please explain

5 years ago
Reply to  Seemabidda

as their power consumption cost is subsidized

5 years ago
Reply to  Noah

Thanks 🙂

5 years ago

Thanks CD for such a crisp and easy material to read and consolidate. Please do provide more such materials


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