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Reforms-Based and Results-Linked, Revamped Distribution Sector Scheme:

GS Paper 3:

Topics Covered: Infrastructure – Energy.



REC and PFC, the state-run lenders that are the nodal lending agencies for the Rs 3.03 lakh crore revamped distribution sector scheme (RDSS) launched by the Union ministry of power in August last year, will release the first tranche of funds to a host of states including Uttar Pradesh, Assam and Meghalaya by March 31.

  • The funds will be disbursed in the form of ad hoc 10% of grant from the central government, while the rest of the disbursal will depend on the discoms concerned fulfilling various conditions under the scheme.


About the scheme:

It is worth Rs. 3.03 trillion scheme wherein the Centre’s share will be Rs. 97,631 crore.

  • It aims to improve the operational efficiencies and financial sustainability of discoms (excluding Private Sector DISCOMs).


Highlights of the scheme:

  1. It is a reforms-based and results-linked scheme.
  2. It seeks to improve the operational efficiencies and financial sustainability of all DISCOMs/Power Departments excluding Private Sector DISCOMs.
  3. The scheme envisages the provision of conditional financial assistance to DISCOMs for strengthening supply infrastructure.
  4. The assistance will be based on meeting pre-qualifying criteria as well as upon the achievement of basic minimum benchmarks by the DISCOM.
  5. The scheme involves a compulsory smart metering ecosystem across the distribution sector—starting from electricity feeders to the consumer level, including in about 250 million households.
  6. Scheme also focuses on funding for feeder segregation for unsegregated feeders.
  7. The Scheme has a major focus on improving electricity supply for the farmers and for providing daytime electricity to them through solarization of agricultural feeders.



  • Existing power sector reforms schemes such as Integrated Power Development Scheme, Deen Dayal Upadhyaya Gram Jyoti Yojana, and Pradhan Mantri Sahaj Bijli Har Ghar Yojana will be merged into this umbrella program.
  • Each state would have its own action plan for implementation of the scheme rather than a ‘one-size-fits-all’ approach.
  • Nodal agencies for the scheme’s implementation are Rural Electrification Corporation (REC) Limited and Power Finance Corporation (PFC).

The scheme’s cost is borne by the Centre and state governments in a 3:2 ratio. The state governments will be free to borrow from either REC-PFC or from other financial institutions to mobilise the funds.


Objectives of the scheme:

  1. Reduction of average aggregate technical and commercial loss to pan-India levels of 12-15% by 2024-25.
  2. Narrow the deficit between the cost of electricity and the price at which it is supplied to zero by 2024-25.
  3. Developing institutional capabilities for modern DISCOMs.
  4. Improvement in the quality, reliability, and affordability of power supply to consumers through a financially sustainable and operationally efficient distribution sector.


Issues with earlier initiatives are as follows:

Insufficient Monitoring mechanism: Due to inadequate metering and data collection system in place, utilities have not been able to conduct energy audit, which is crucial for any energy business.

Accountability and Technology Issues: The Schemes could not reduce the high Aggregate Technical & Commercial (AT&C) losses due to high Transmission and Distribution (T&D) losses coupled with low collection efficiency. Low level of collection is attributable to lack of employees’ accountability, inadequate collection facilities, limited usage of advanced technology, billing errors etc.

Lack of Consumer Records: Schemes have not put in mechanism for maintaining consumer database and asset database, which can be addressed through IT and communication solutions. Most utilities maintain manual records of consumers. This leads to mismanagement and losses.

Revenue & Expenditure gaps: The gap between discoms’ costs (average cost of supply) and revenues (average revenue realised), which was supposed to have been eliminated by now, stands at Rs 0.49 per unit in the absence of regular and commensurate tariff hikes.

Electrification and Support structure mismatch: The schemes have not been able to address the gap between increasing electrification and related supporting structural mechanism.



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Prelims Link:

  1. About REC.
  2. About DDGJY.
  3. About IPDS.
  4. Features of Revamped Distribution Sector Scheme.

Mains Link:

Write a note on power sector reforms in India.

Sources: PIB