UPSC Daily Editorial Analysis | Beyond The Bail Out | 30th July, 2022

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What the article is about:
  • The article talks about India’s rising twin deficits and one of the reasons for that i.e. energy sector.
Relevance:
  • GS3: Economy, mineral and energy resources
Analysis:
  • Over the past few weeks, India is twin deficits(fiscal deficits and current account deficits) is on rise.
Issues with energy sector:
  • Coal India’s inability to ramp up production is leading to increased coal imports, as a result of it current account deficits is increasing.
  • Since 2013-14 Indian economy has grown by around 50%, but coal india (responsible for 80% of India’s total coal production) has raised its production by 34% over the same period.
  • Coal imports for thermal power have more than doubled, causing the deficits to widen further.
  • Inability to forecast demand accurately leads to annual coal crisis in nation.
  • Divide between public and private sector is deepening, the AT&C losses for state own discoms were pegged at 21.7%, while for private sector, losses were at 8% .
AT&C losses: It is combination of energy loss (Technical loss + Theft + inefficiency in billing)& commercial loss (Default in payment + inefficiency in collection).
 
Government’s efforts to rescue state discoms:
  • In early 2000s, scheme for repayment of SEB dues amounted to 41,473 crore.
  • In 2012, financial restructuring plan added up to 1.19 lakh crore.
  • In 2015, UDAY involved a transfer of Rs 2.01 lakh crore to state government balance sheet.
  • In may 2022, government announced another scheme to relax their payments.
Impact of these bailouts on the exchequer:
  • Another bailout package for 18 large states will cost up to RS 4.32 lakh crore or 2.3% of the their combined GSDP as per the RBI.
Conclusion:
  • In future discoms will be left with subsidised connections, largely agricultural and low income households, it would result in increased losses.
  • Therefore, tacking these deficits requires addressing the issue of government control over critical aspects of India’s energy sector.



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