Subsidising Electricity: Working With DISCOMs For Direct Benefit Transfer To Poor, Says World Bank

India will soon be implementing a direct benefits program (DBT) to ensure affordable electricity to the poor households in India, Financial Express has reported, with the World Bank planning the scheme in collaboration with state power distribution companies. The scheme will emulate the ongoing LPG DBT scheme.

Senior Economist of World Bank South Asia Region Fan Zhang praised the reform in distribution of LPG subsidies. He told that the real-time cash transfer programme was a good example of how subsidies should be given to poor households.

“The World Bank is already working with some state distribution utilities in deciding new ways of providing direct cash transfer, rather than create a distortion in electricity price, to protect the poor. Right now, under the current structure, they overcharge industry so that they can provide electricity to agricultural households at the low price. There are experiments being done on the ground on what are the ways to protect the consumers well from such distortions,”, Zhang said.

The World Bank released the report titled “In the Dark: How much do power sector distortions cost South Asia" on Monday (17 December 2018). The report estimated $86.1 billion economic cost due to distortion of the power sector in 2015-16.

He added that subsidies were not the main cause of distortions in power sector. Coal supply at a higher price is affecting the power sector in India according to Zhang.