The Government of India, the Government of Rajasthan and the World Bank signed here today a $250 million Development Policy Loan (DPL) to support the Government of Rajasthan in improving the performance of its Electricity Distribution Sector under the State’s 24x7 Power for All program. The Agreement for the Project was signed by Mr. Sameer Kumar Khare, Joint Secretary, Department of Economic Affairs, Ministry of Finance, on behalf of the Government of India; Shri P. Ramesh, Special Secretary, Government of Rajasthan on behalf of the Government of Rajasthan; and Mr. Hisham Abdo, Acting Country Director, World Bank India, on behalf of the World Bank.

The Second Programmatic Electricity Distribution Reform Development Policy Loan for Rajasthan is the second in the series of two operations planned for a comprehensive turnaround of Rajasthan’s electricity distribution sector. The First Loan closed in March 2017.

The Electricity Distribution Utilities (DISCOMs) in Rajasthan provide electricity to about 9.5 million customers. The key areas that the program will support include: Strengthening Governance in the Distribution Sector in the State by establishing Annual Performance MoUs between the DISCOMs and the State Government; putting in place a Performance Management System; providing incentives to employees for improving performance; Financial Restructuring and recovery in the Sector by transferring considerable amounts of the DISCOMs debt to the State; bringing in more discipline in the revenue requirements of DISCOMs; taking initiatives in reducing the costs of energy procurement; and improving the operational performance of the DISCOMs through initiatives like publishing feeder level energy audits and increased usage of IT among others.

Speaking on the occasion, Mr. Sameer Kumar Khare, Joint Secretary, Department of Economic Affairs, Ministry of Finance said that this Program is aligned to the Broader Reform Program, developed by the Government of India (GoI) and adopted by the Rajasthan Government, to improve the performance of DISCOMs in the State. He said that this will contribute to the State’s Fiscal Sustainability, and the objective of 24x7 Power for All initiative, which aspires to provide continuous, reliable power supply to all households in Rajasthan by 2019.

This operation will deepen the Institutional and Operational Reforms that were launched in late 2015 centered around the Government of India’s (GoIs) Ujwal DISCOM Assurance Yojna (UDAY), which Rajasthan joined in 2016 and the Rajasthan State Electricity Distribution Management Responsibility (RSEDMR) Act, which aims to reform the Governance of DISCOMs and bring greater public accountability in their functioning.

Mr. Hisham Abdo, Acting World Bank Country Director in India said that in its second phase, this Program will continue to support the ongoing reforms that the distribution companies are making for a financial turnaround. He further said that improved financial health of DISCOMS will help free-up the State’s resources for spending on social sectors, allowing for businesses to grow and jobs to be created.

To address the concerns of affordability and access to electricity for the poor, the program also supports the Government of India's Domestic Efficient Lighting Program (DELP), under which more than 15 million LED lamps have been distributed in the State.

Mr. Rohit Mittal, Senior Energy Specialist and Mr. Frederico Gil Sander, Lead Economist of the World Bank and Task Team Leaders for the operation said that the Electricity Distribution Sector in Rajasthan has taken number of initiatives over the last few years that have helped in improving the operational and financial health of the DISCOMs. They said that it is important that the DISCOMs continue to focus on improving operational efficiency, consumer engagement and transparency in the sector among other initiatives to continue the positive trend in performance and steer the electricity distribution sector on a path to sustainable recovery.

 The loan from the International Bank for Reconstruction and Development (IBRD), has a 3-year grace period, and a maturity of 21 years.

Electricity distribution reform promotes governance and financial restructuring to improve DISCOM performance, operational efficiency and consumer access. The program supports governance reforms through Annual Performance MoUs, a Performance Management System and employee incentives; advances financial restructuring by transferring DISCOM liabilities to the State and enforcing revenue discipline while reducing procurement costs; and improves operations via feeder-level energy audits, increased IT use, consumer engagement and transparency to strengthen DISCOM performance and fiscal sustainability.