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Modi Govt setting up National Electricity Distribution Company, MoU Signed

India's two biggest state-run power companies POWERGRID and NTPC have signed an MoU for setting up National Electricity Distribution Company Ltd. (NEDCL) through JVC on 50:50 equity basis

Modi Govt setting up National Electricity Distribution Company, MoU Signed
Modi Govt setting up National Electricity Distribution Company, MoU Signed

New Delhi: In a major boost to India's ailing power distribution sector, the Modi government has finally started giving shape to the National Electricity Distribution Company Ltd (NEDCL). An MoU to this effect was signed between officials of PowerGrid and NTPC on Friday. Both power PSUs will have a 50-50 partnership in the new venture. "Main aim is to undertake business for distribution of electricity in distribution circles of India & related activities.," said PowerGrid in a tweet.

A major boost to state DISCOMs

The idea to set up a National Electricity Distribution Company was being explored for a very long time. Electricity distribution companies (DISCOMs) have so far proved to be the weakest link in the electricity value chain.

"The main aim behind this MoU is to undertake the business for distribution of electricity in distribution circles of India & related activities,"- PGCIL

Poor payment records of state-owned DISCOMs have not only adversely affected power generation companies but have caused stress on the lenders as well. Thus this step is being seen as a 'game-changer' that will have a  long-term impact on the fortunes of the power sector.

Alt= The main aim behind this MoU is to undertake the business for distribution of electricity in distribution circles

NEDCL will address rising NPAs in the power sector

The NEDCL will procure electricity at competitive rates and help address the issue of rising non-performing assets (NPAs) in the power sector. As per data compiled by the Association of Power Producers, state-run DISCOMs owed Rs 41,133 crore to private sector generators as on January 31, and many of these generators are struggling to keep their loan repayment schedule on track. Setting up the National Electricity Distribution Company Ltd is one of the reforms announced by the Modi government in the first 100 days of assuming charge. The new company will function under the administrative control of the power ministry.

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