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  • The Distribution Licensee (Discom) has the universal service obligation of supplying electricity to meet the full demand of every consumer in its licensed area. 

  • It is responsible for projecting demand growth and making arrangements for reliable electricity supply.

  • Discoms enter into long-term power purchase contracts with power-generating plants to ensure a steady supply of electricity. 

  • These contracts help in meeting the growing demand for electricity and maintaining a comfortable power supply position.

  • Consumers with a load of 1 MW and above have the right to open access, allowing them to buy electricity from any supplier and pay the Discom for the use of their distribution network. 

  • Cross-subsidy surcharges are levied to balance the tariffs between higher-end industrial and commercial consumers and lower-end households.

  • The challenges faced by Discoms are primarily in the domain of political economy. 

  • Regulators struggle to determine cost reflective tariffs, and state governments find it difficult to provide timely subsidies

  • Misgovernance and rent-seeking practices in some states contribute to the financial difficulties of Discoms.

  • Investment in generating capacity relies on long-term power purchase agreements with Discoms, which de-risk financing. 

  • Discoms play a crucial role in projecting demand and entering into contracts to meet increasing electricity demand. 

  • Without Discoms, the energy transition to renewables and the reliability of power supply would be at risk.

  • The UK's experience with deregulation and competition in the electricity market shows that significant demand growth did not occur after the new system was implemented. 

  • The state had to invite bids for renewable energy to drive the energy transition.

  • Instead of wholesale deregulation, alternative solutions such as 

    • addressing governance issues, 

    • implementing timely subsidies, 

    • exploring privatization in certain states where misgovernance persists should be considered.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: DISCOMS UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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