{"id":198038,"date":"2022-07-30T18:17:28","date_gmt":"2022-07-30T12:47:28","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=198038"},"modified":"2022-07-30T18:17:53","modified_gmt":"2022-07-30T12:47:53","slug":"government-bailouts-are-not-the-answer-to-indias-energy-sector-woes","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/government-bailouts-are-not-the-answer-to-indias-energy-sector-woes\/","title":{"rendered":"Government bailouts are not the answer to india\u2019s energy sector woes\u00a0"},"content":{"rendered":"\n

Source<\/strong>: The post is based on an article \u201cGovernment bailouts are not the answer to India\u2019s energy sector woes<\/strong>\u201d published in the Indian Express<\/strong> on 30th<\/sup> July 2022<\/strong>.<\/p>\n

Syllabus<\/strong>: GS 3 Infrastructure; Energy<\/p>\n

Relevance<\/strong>: Power Sector Reforms; DISCOMS<\/p>\n

News<\/strong>: Over the past few weeks, there has been much tension over India\u2019s twin deficits, <\/strong>i.e., the current account deficits<\/strong> and rising fisca<\/strong>l deficit. Everything has been tried to control, twin deficits, except for the issue of state ownership and control.<\/p>\n

What are the structural Causes behind the twin deficits?<\/strong><\/h5>\n

The state ownership<\/strong> and control<\/strong> of various entities in the power energy chains<\/strong> are central to a higher\u202fcurrent account deficit (CAD)<\/strong> and also growing fiscal risks<\/strong> at the state level.<\/p>\n

(1) In the case of coal, the coal sector still has a state monopoly. Although India has one of the largest coal reserves in the world<\/strong>, it is also one of the largest coal importers.<\/strong> It is because India has not been able to increase coal production as per rising demand.<\/p>\n

For example<\/strong>, Coal India<\/strong> is unable to raise coal production<\/strong> to meet the growing demand. From 2013-14, the Indian economy has grown by around 50%. But, Coal India, which accounts for around 80% of India\u2019s total coal production, was able to raise its output by just 34% over the same period.\u00a0 Therefore, India\u2019s reliance on coal imports<\/strong> (thermal and cooking) has risen in the last few years. Further, this has been at the root of the country\u2019s widening current account deficit<\/strong>.<\/p>\n

(2) The state-owned power distribution companies (DISCOMS)<\/strong> have also failed to improve their financial<\/strong> and operational positions. <\/strong>The divide between the public and private sector DISCOMs is deepening.<\/p>\n

The State-owned DISCOMS<\/strong> are not able to pay their dues to power generating companies, the payments to coal miners are also delayed. This, in turn, affects the financial stability<\/strong> of the entire power chain. All the bailout attempts to rescue state-owned DISCOMS have actually increased the burden on the public exchequer, without any improvement in DISCOM\u2019s position<\/strong>.<\/p>\n

Notwithstanding various schemes to turn around their finances, the total debt of all DISCOMS put together stood at Rs 5.14 lakh crore at the end of 2019-20. If state governments were to infuse funds to clear their dues to generating companies and structure another bailout package, then the state\u2019s fiscal situation will further worsen.<\/p>\n

Other possible challenges in the path of improvement in the fiscal situation<\/strong><\/h5>\n

In the coming period, State-owned DISCOMS consumers will be limited to only subsidised connections, largely agricultural and low-income households. The reasons are as below:<\/p>\n

(1) Due to high tariffs charged by the DISCOMS on industrial and commercial consumers<\/strong>, most of the industrial units have already shifted towards other low-cost alternatives<\/strong> like a captive and solar power.<\/p>\n

(2) Recently, the Union Ministry of Power<\/strong> has also reduced the threshold for green energy open access.<\/p>\n

This would mean that DISCOMs losses will rise as cross subsidisation<\/strong> from commercial and industrial consumers will decline, increasing their dependence on state subsidies.<\/p>\n

Therefore, the government should address its control over critical aspects of India\u2019s energy sector and shift to reforms like market-determined prices<\/strong>. This will tackle the twin deficits discussed above.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on an article \u201cGovernment bailouts are not the answer to India\u2019s energy sector woes\u201d published in the Indian Express on 30th July 2022. Syllabus: GS 3 Infrastructure; Energy Relevance: Power Sector Reforms; DISCOMS News: Over the past few weeks, there has been much tension over India\u2019s twin deficits, i.e., the… Continue reading Government bailouts are not the answer to india\u2019s energy sector woes\u00a0<\/span><\/a><\/p>\n","protected":false},"author":10308,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,10500],"class_list":["post-198038","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-indian-express","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":1700770981,"cached_date":1701694631},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/198038","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10308"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=198038"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/198038\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=198038"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=198038"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=198038"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}