States to get Centre’s financial support for free power scheme

Source: The Economic Times, Sept 19, 2016

NEW DELHI: The Centre will extend financial support to states to enable them to offer new electricity connections free of cost to everyone.

At present, electricity connections to only below poverty line (BPL) families are offered for free. A senior government official said the Union power ministry has proposed to extend the free connections scheme to all in line with the Centre’s goal to achieve 24×7 power for all by March 2019.

Rural Electrification Corporation (REC) is working on a scheme to provide long-term loans to states that agree to offer free new electricity connections. The scheme will be a key issue for discussion when Union power minister Piyush Goyal meets state power ministers during the two-day conference of power ministers starting October 7 in Gujarat. REC is working on a scheme for financing the power distribution companies so that they could release new electricity connections to households.

The scheme covers funding of expenses like laying of lines to give access to electricity, installation of meters and other accessories. As per the plan, the distribution companies will have to get new connection plans approved by REC, which will reimburse expenses incurred by power utilities in giving electricity access to households.

“It will be an optional scheme for the states. Some states may not see merit in providing free power connections to remote areas that are not connected to the electricity grid. We would encourage such states to at least offer electricity connections on easy monthly instalments of as low as Rs 100 per month for 4-5 years,” the government official said.

ET View: End subsidies
We do need transparent budgetary subventions to better allocate resources for power. But in tandem, we need to generate the necessary political will to put paid to populism and gross open-ended giveaways and subsidies in power. In a highly capital-intensive sector, routine revenue leakage in power distribution, with the powers that be in effect providing patronage for plain theft of electricity, would verily short-circuit the system. It would guarantee poor quality of power, which, in turn, would stultify growth.

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