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World Bank calls for more transparency in India's power subsidy regime

25 Feb 2015 Evaluate

Calling for more transparency in India's power subsidy regime, the global development finance body, World Bank has suggested re-identification of the target population to improve the balance-sheets of losses-stricken discoms. In a review report, the World Bank highlighting the gap between the volume of subsidies booked by utilities as compensation and the amount they receive from the government, said that this worsens economics of already struggling utilities, undermining their  creditworthiness and preventing them from investing to improve service  delivery.

In the report, the World Bank identified the customer-facing distribution companies as the vertical that needs attention. It said the sector should be allowed to operate in a commercially viable manner by making sure who are not eligible for subsidy pay for what they consume. Such an approach can lower the subsidy burden on the Government.

World Bank also asked banks to pull up their socks and critically look at every loan proposal from power sector firms, without the back up of a sovereign guarantee. Such a practice will ensure that the sector does not lose sight of commercial interests.

The report focusing distribution as a key to performance and viability of the Indian power sector was prepared by the World Bank team led by Sheoli Pargal and Sudeshna Ghosh Banerjee, at the request of power ministry and ministry of economic affairs to review the Indian power sector, enactment of the landmark Electricity Act of 2003. The covers various States of the country and mentions how the financial health of the sector is fragile, limiting its ability to invest in delivering better services. It also said that to ensure 24x7 power supply to citizens under the Modi government's 'power for all' initiative, utilities would have to strengthen their transmission grids and distribution infrastructure, and enhance billing and collection systems.

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