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Scheme for Procurement of Power

Status of Power Shortage in State

  • There are a number of states which are suffering from regular power cuts and continuous power shortages.
  • Summer of 2022 had affected power generation that is based on coal.
    • India faced its worst electricity shortage in more than six years and the early onset of summer had pushed up demand to record levels.
    • States like Rajasthan, Haryana, Andhra Pradesh, Gujarat are witnessed their worst power cuts in more than 6 years.

Causes for Shortage of Power

  • Early summer: Extreme heat conditions in many parts of the country combined with acute coal shortages have triggered blackouts.
    • According to the IMD, March was the hottest month India has witnessed in over a century in 2022.
    • Scorching heat conditions had pushed up power demand by households, industries alike.
    • This had put added burden on the power plants, which were dealing with severe shortage of coal rakes.
  • Coal Crisis: Coal accounts for nearly 75 per cent of India’s power generation and power plants account for over three-fourths of the over one billion tonnes of annual coal consumption.
    • According to Central Electricity Authority in April, out of 108 power plants in India 88 of them that are based on domestic coal had critical stock levels.
    • The reduced availability of railway rakes to transport coal has led to coal inventories being at the lowest pre-summer levels in at least 9 years.
  • Discom Losses: Despite two decades of sectoral reforms, the aggregate losses of discoms stand at 21% (2019-20).
    • This is reflective of both operational inefficiency and poor recovery of dues from consumers, including those affiliated with state governments and municipal bodies.
    • These losses are also the reason for discoms not being able to pay the generators on time, resulting in payment delays to Coal India, which, in turn, is reluctant to supply coal on request.
  • Multiple Structural Fault Lines: Utilities do not undertake effective resource planning.
    • Moreover, the blame-game in such cases is inevitable; with every crisis, states blame the Centre for faulty coal allocation and dispatch, and the Centre blames states’ inability to pay upstream suppliers.


Highlights of the Scheme

  • Scheme is expected to help the states that are facing power shortage and also help generation plants to increase their capacities.
  • It will help generation plants to increase their capacities.
  • It is done under the Scheme for Harnessing and Allocating Koyala Transparently in India or SHAKTI policy.
  • PFC Consulting Limited, a wholly owned subsidiary of PFC Ltd, has been designated as the nodal agency by the Ministry of Power.
  • Supply of electricity will commence from April 2023.


About SHAKTI Policy

  • It was launched in 2018 to provide coal to stressed power units which lack coal supply.
  • It aimed to phase out the present Letter of Assurance and Fuel Supply Agreement (FSA)-based regime, and instead introduce a more transparent and competitive coal allocation policy.
  • The policy was amended in March 2019 specifically to aid stressed projects.
  • Objective: To ensure the availability of coal to all the Thermal Power Plants in India, in a way that is transparent and objective. At the same time, it aims to transfer the benefits of linkage coal to the end consumers.
    • To reduce the dependence on imported coal and promote domestic industries.
  • Significance: The Companies, which did not have coal linkages before the introduction of the SHAKTI Scheme, would benefit when they would get domestic fuel supplies through auction at competitive rates.


Power Finance Corporation Ltd (PFC)

  • Incorporated in 1986, PFC is the largest Infrastructure Finance Company today, exclusively dedicated to Power Sector under the administrative control of the Ministry of Power.


Power sector Reforms by Government

  • Ujwal DISCOMs Assurance Yojana (UDAY):
    • The UDAY scheme was introduced with the objective to improve the operational and financial efficiency of state DISCOMs.
    • The scheme allowed state governments to take over 75% of outstanding DISCOM debt over two years.
    • Incentives offered to participating states included access to additional/priority funding through Central Government schemes such as DDUGJY, IPDS, Power Sector Development Fund (PSDF).
  • Revamped Distribution Sector Scheme (RDSS):
    • It is a reforms-based and results-linked scheme.
    • It seeks to improve the operational efficiencies and financial sustainability of all DISCOMs/Power Departments excluding Private Sector DISCOMs.
    • The scheme envisages the provision of conditional financial assistance to DISCOMs for strengthening supply infrastructure.
    • The assistance will be based on meeting pre-qualifying criteria as well as upon the achievement of basic minimum benchmarks by the DISCOM.
    • 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.

UPSC Mains Result 2022


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