REC and PFC, the state-run lenders that are the nodal lending agencies for the Rs 3.03 lakh crore revamped distribution sector scheme (RDSS) launched by the Union ministry of power in August last year, will release the first tranche of funds to a host of states including Uttar Pradesh, Assam and Meghalaya by March 31, sources said.

According to sources, the funds will be disbursed in the form of ad hoc 10% of grant from the central government, while the rest of the disbursal will depend on the discoms concerned fulfilling various conditions under the scheme.

The scheme’s cost is borne by the Centre and state governments in a 3-2 ratio. The state governments will be free to borrow from either REC-PFC or from other financial institutions to mobilise the funds.

The RDS scheme follows the Centre’s Rs 1.35 lakh crore liquidity infusion scheme where discoms received funds under the respective state governments’ guarantees to pay off their pending dues to the power generating firms.

The disbursements under the RDSS would be contingent on states helping discoms implement prepaid smart meters, reduce transmission and distribution losses, ensure reliable power supply and segregate feeders for agriculture purposes that are solarised under the KUSUM scheme.

States like Uttar Pradesh, Andhra Pradesh, Himachal, Kerala, Assam, Meghalaya, and Uttarakhand have been the frontrunners in planning their operational and financial reforms under the scheme. Their state-level distribution reforms committees (DRC) and state Cabinets have also approved the proposals, including Action Plan and the detailed project reports.

“Almost half of the 55 state discoms have received the state governments’ approvals, while others are likely to get such approvals soon. DPRs are being prepared and the disbursals will start under the scheme soon,” an official said on conditions of anonymity.

An REC official in a written reply said, that, he anticipates only a few discoms to be eligible for fund release in the current financial year. “Most of these activities are expected to be completed shortly and therefore disbursal for most discoms would be done in the next quarter (Q1FY23),” he said

“The approval for the proposal by Assam has already been conveyed to the state, which entails disbursal of Rs3,657 crore for smart metering works and Rs 2,570 crore for infrastructure works. Initially, only 10% of the estimated grant funds from government of India shall be disbursed. All subsequent releases of grant shall be released only after achieving the targets specified under the discom’s agreed reforms-based result evaluation,” the REC official said.

As part of the scheme, the discoms will have to reduce the AT&C losses to 12-15% by 2024-2025, and bring down the gap between the average cost of supply (ACS) of power and the average revenue realised (ARR) to zero by 2025.

REC is the nodal agency for 19 states and UTs, with the major ones being Bihar, Chhattisgarh, Jammu and Kashmir, Rajasthan, Tamil Nadu, Uttar Pradesh, and West Bengal. As the fund release under the scheme from the next financial year is linked to the various pre-qualification conditions, the states have been apprised of corresponding actions to be taken for ensuring compliance. However, based on our assessment of their readiness, most of the states have taken measures to comply with pre-qualifying conditions

RDSS has an outlay of Rs 3,03,758 crore with an estimated budgetary support from the central government of Rs 97,631 crore, which would be available till FY 2025-26. The assistance is reforms linked and will be based on meeting pre-qualifying criteria. The unique feature of the scheme is that its implementation is based on the action plan worked out for each state to address state specific issues, rather than a “one-size-fits-all” approach.