World Bank supports Rajasthan improve performance of electricity distribution sector

The Second Programmatic Electricity Distribution Reform Development Policy Loan for Rajasthan is the second in the series of two operations planned for a comprehensive turnaround of Rajasthan’s electricity distribution sector.

The Government of India, the Government of Rajasthan and the World Bank today signed a $250 million development policy loan (DPL) to support the state improve the performance of its electricity distribution sector under the state’s 24x7 Power for All program.

The Second Programmatic Electricity Distribution Reform Development Policy Loan for Rajasthan is the second in the series of two operations planned for a comprehensive turnaround of Rajasthan’s electricity distribution sector. The first loan closed in March 2017.

The electricity distribution utilities (DISCOMs) in Rajasthan provide electricity to about 9.5 million customers. The key areas that the program will support include: strengthening governance in the distribution sector in the state by establishing annual performance MoUs between the DISCOMs and the state government; putting in place a performance management system; providing incentives to employees for improving performance; financial restructuring and recovery in the sector by transferring considerable amounts of the DISCOMs debt to the state; bringing in more discipline in the revenue requirements of DISCOMs; taking initiatives in reducing the costs of energy procurement; and improving the operational performance of the DISCOMs through initiatives like publishing feeder level energy audits and increased usage of IT among others.

“This program is aligned to the broader reform program, developed by the Government of India (GoI) and adopted by the Rajasthan government, to improve the performance of DISCOMs in the state,” said Sameer Kumar Khare, Joint Secretary, Department of Economic Affairs, Ministry of Finance.  “This will contribute to the state’s fiscal sustainability, and the objective of 24x7 Power for All initiative, which aspires to provide continuous, reliable power supply to all households in Rajasthan by 2019.”

The agreement for the Project was signed by Sameer Kumar Khare, Joint Secretary, Department of Economic Affairs, Ministry of Finance, on behalf of the Government of India; P Ramesh, Special Secretary, Energy Department, Government of Rajasthan, on behalf of the Government of Rajasthan; and Hisham Abdo, Acting Country Director, World Bank India, on behalf of the World Bank.

This operation will deepen the institutional and operational reforms that were launched in late 2015 centered around the Government of India’s (GoIs) Ujwal DISCOM Assurance Yojna (UDAY), which Rajasthan joined in 2016 and the Rajasthan State Electricity Distribution Management Responsibility (RSEDMR) Act, which aims to reform the governance of DISCOMs and bring greater public accountability in their functioning.

“In its second phase, this program will continue to support the ongoing reforms that the distribution companies are making for a financial turnaround,” said Hisham Abdo, Acting World Bank Country Director in India. “Improved financial health of DISCOMS will help free up the state’s resources for spending on social sectors, allowing for businesses to grow and jobs to be created,” he added.

To address concerns of affordability and access to electricity for the poor, the program also supports GoI’s Domestic Efficient Lighting Program (DELP), under which more than 15 million LED lamps have been distributed in the state.

“The electricity distribution sector in Rajasthan has taken a number of initiatives over the last few years that have helped in improving the operational and financial health of the DISCOMs. It is important that the DISCOMs continue to focus on improving operational efficiency, consumer engagement and transparency in the sector among other initiatives to continue the positive trend in performance and steer the electricity distribution sector on a path to sustainable recovery,” said Rohit Mittal, Senior Energy Specialist and Frederico Gil Sander, Lead Economist of the World Bank and Task Team Leaders for the operation.

The loan, from the International Bank for Reconstruction and Development (IBRD), has a 3-year grace period, and a maturity of 21 years.