World Bank approved $250 million loan to Support Electricity Distribution Sector Reforms in Rajasthan

The World Bank Board on 25 March 2016 approved a 250 million US dollar Development Policy Loan (DPL) for Rajasthan. The loan was granted to support the government of Rajasthan in improving the performance of its electricity distribution sector under the State’s 24x7 Power for All program.

The First Programmatic Electricity Distribution Reform Development Policy Loan for Rajasthan will be the first in a series of two operations for a comprehensive turnaround of Rajasthan’s electricity distribution sector.

The key areas that the operation will support

• Strengthening governance in the distribution sector in the state by giving more operational autonomy to the utilities

• Establishing targets for reducing the gap between the cost of supply and revenue recovery

• Providing incentives to employees for improving performance

• Financial restructuring and recovery in the sector through transferring considerable amount of the debt of the DISCOMs to the state

• Bringing in more discipline in DISCOMs submissions to regulatory commission towards revenue requirements and initiatives towards reducing the costs of energy procurement

• Improving the operational performance of the DISCOMs

The loan, from the International Bank for Reconstruction and Development (IBRD), has a 5-year grace period, and a maturity of 18 years.

Steps taken by Rajasthan Government in Electricity Distribution Sector Reforms

• Rajasthan Government has issued and notified the Electricity Distribution Management Responsibility Ordinance (the first of its kind for any Indian state). The ordinance provides for financial restructuring, long-term planning, corporate governance, regulatory compliance and policy directives.

• It has decided to lay out clear performance targets with the management of the DISCOMS for better accountability in the sector for which annual Memorandum of Understandings (MoUs) will be signed between the state government and each of the three DISCOMs.

• The DISCOMs have developed their Employee Performance Incentive Schemes that provides for a financial incentive to employees based on their performance in reducing Aggregate Technical and Commercial (AT&C) losses in their respective sub-divisions.

• The state and the DISCOMs have entered into tripartite MoUs with Union Government for the implementation of the UDAY program.

• The state has also set up the Rajasthan Energy Development Corporation Ltd, a company expected to optimize power purchases on behalf of DISCOMS.

• To reduce distribution losses, several measures have been undertaken like smart and pre-paid metering, regular energy audits, unified billing system, increased usage of IT systems and effective employee engagement.

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