The union territory of Puducherry has opposed the central government’s proposal to privatize all distribution companies (DISCOMs) in the union territories (UTs) across the country.

According to a Twitter post by Puducherry’s Chief Minister V. Narayanasamy, a resolution was passed unanimously during an assembly session voting against the central government’s move to privatize electricity supply and distribution companies.

Narayanasamy, in a press meeting recording attached to the tweet, explained that the UT government currently provides free electricity to all farmers in the state and that privatizing the sector would impede its goals. He argued that these decisions must be left to the discretion of individual state and union territories.

Background:

In May 2020, the center proposed to privatize DISCOMs in the union territories. DISCOMs in the union territories come under the administration of the central government while the respective state governments govern those in the states. The UTs include Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, and Daman and Diu, Delhi, Jammu and Kashmir, Lakshadweep, Ladakh, and Puducherry.

Distribution companies have been a significant strain on the Indian power system. Their poor financial performance has been weighing down the entire sector with their inability to pay power generators on time, manage their losses, and iron out other inefficiencies.

Early June, Union Minister of Power R.K. Singh sought the Finance Commission’s support to revamp the Indian power sector at the state level and asked for ₹3 trillion (~$40.05 billion) over the next five years to help achieve this goal. The funds will be used to focus on reduction of losses, separate feeders for agriculture, and smart prepaid meters, in light of the poor financial performance of DISCOMs.

In May, Finance Minister Nirmala Sitaraman announced that power distribution companies would receive ₹900 billion (~$12.03 billion) as part of the Government of India’s stimulus package to help the Indian economy recover from the coronavirus crisis.

At the end of March 2020, DISCOMs owed renewable energy generators ₹68.37 billion (~$914.5 million) in outstanding payments spread across 307 pending invoices, according to data from the Ministry of Power’s payment ratification and analysis portal.