DisComs post-COVID-19: Untangling the historical challenges, needs, and long-term ambitions

COVID has unleashed a relatively unique global pandemic with economic, human, and institutional upheavals that haven’t been seen in generations. Economies are in a tailspin, and employment has been one of the biggest casualties beyond direct human health. The collapse of both liquidity and economic activity hits DisComs harder than many other sectors.

India implemented the world’s most stringent nationwide lockdown,[1] and as it enters the period of phased recovery, there will be enormous challenges summarised by two key issues:

• How do we align the short-term (immediate and urgent) needs with the long-term ambitions and visions, especially of economic viability and sustainability? If the largest challenge facing the energy sector was not just the transition but ensuring it is a just transition, what happens post-COVID-19?
• In the short-term, what are the best actions needed to provide support that aren’t either distortionary or foster moral hazard?

The government just announced enormous stimulus packages, perhaps in the order of 10% of GDP! In the first phase announced, Rs. 90,000 crores of stimulus is aimed at DisComs. Our initial analysis indicates this is welcome (and necessary). But it would likely be insufficient if we apply a long-term lens. Not because of the amount, but how it’s structured. This is either a loan or changes to existing financing, and it isn’t a grant or a write-off, and it’s unclear how this addresses underlying issues.  As details emerge, we will subsequently write more about the stimulus, rather, stimuli.

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[1] https://www.economist.com/finance-and-economics/2020/04/04/emerging-market-lockdowns-match-rich-world-ones-the-handouts-do-not

Recommended Citation: Tongia, Rahul: “DisComs Post COVID-19: Untangling the historical challenges, short-term needs, and long term ambitions,” Brookings India Discussion Note, May 2020.