The National Thermal Power Corporation Limited (NTPC) and the Power Grid Corporation of India Limited (PGCIL) have signed an agreement to form a joint venture.

The joint venture, called the National Electricity Distribution Company Limited ( NEDCL), will be the first country-wide public sector power distribution company and will have a 50:50 equity ratio between the two companies.

The decision to float a new public sector distribution company with a pan-India presence comes in the wake of several state-owned DISCOMs being financially stressed, and the central Ujwal DISCOM Assurance Yojana (UDAY) program not yielding the desired results.

The joint venture will be incorporated after obtaining necessary approvals from the government.

In a tweet, PGCIL had stated that the objective of the new entity is to undertake the business of distribution of electricity across India, enabling the two PSU giants to foray into the consumer electricity distribution business.

An agreement has been signed with @ntpclimited for setting up National Electricity Distribution Company Ltd. (NEDCL) through JVC on 50:50 equity basis. Main aim is to undertake business for distribution of electricity in distribution circles of India & related activities. pic.twitter.com/dEhzvlIp4R

— POWERGRID (@pgcilindia) June 21, 2019

As per the MoU, which was inked on June 21, 2019, in New Delhi, the new public sector unit NEDCL will focus on aggregating electricity demand and supply in the country and may also take over weak electricity distribution utilities.

In May 2019, the Central Electricity Regulatory Commission (CERC) had proposed to grant NTPC electricity trading license in India. The license was to be granted to help the NTPC in implementing renewable energy projects, especially solar and wind energy projects across the country.

The crippling financial health of the DISCOMs across the country has been a nagging issue for the power sector over the years. Though some states appear to have made some progress through the UDAY program, largely, the financial viability of DISCOMs remains unchanged.

Last year, Power Minister R.K. Singh had directed Rural Energy Corporation (REC) and Power Finance Corporation (PFC) to not grant loans to distribution companies making heavy losses (above 15%) unless they chalk out a plan to reduce them.