The government’s approval of the much-anticipated Rs 3 trillion reforms-based and results-linked Revamped Distribution Sector Scheme on June 30, 2021 gave a major impetus to discoms. The scheme seeks to improve the operational efficiency and financial position of state discoms by providing conditional financial assistance for strengthening the power supply infrastructure. A key feature of the scheme is consumer empowerment through prepaid smart metering, to be implemented in the public-private partnership (PPP) mode.
Smart Utilities provides an update on the latest scheme…
Revamped distribution sector scheme
The new scheme will have an outlay of Rs 3,037.58 billion, with an estimated gross budgetary support of Rs 976.31 billion from the central government. The financial assistance will be based on meeting certain pre-qualifying criteria as well as the achievement of minimum benchmarks by the discoms. For the implementation of the scheme, separate action plans will be designed for each state rather than a “one-size-fits-all” approach. The scheme will be available till the year 2025-26. REC Limited and the Power Finance Corporation have been nominated as nodal agencies for facilitating the implementation of the scheme.
Ongoing projects approved under various other government schemes such as the Integrated Power Development Scheme, Deendayal Upadhyaya Gram Jyoti Yojana and Prime Minister’s Development Package-2015 for the Union Territories (UTs) of Jammu & Kashmir and Ladakh will be subsumed by the new scheme. Further, the gross budgetary support savings of about Rs 170 billion under these existing schemes will be a part of the total outlay of the Revamped Distribution Sector Scheme.
Objectives: The key objectives of the scheme include the reduction of AT&C losses to pan-India levels of 12-15 per cent by 2024-25, reduction of the average cost of supply (ACS)-average revenue requirement (ARR) gap to zero by 2024-25, and development of institutional capabilities for modern discoms. Overall, the scheme envisages an improvement in quality, reliability and affordability of power supply to consumers through a financially sustainable and operationally efficient distribution sector.
Eligibility: The scheme provides for annual appraisal of discom performance against predefined and agreed upon performance parameters including AT&C losses, the ACS-ARR gap, infrastructure upgrade performance, consumer services, hours of supply and corporate governance. Discoms have to score a minimum 60 per cent and clear a minimum bar in respect of certain parameters to be eligible for funding under the scheme.
Focus on metering: Smart metering is a key priority area and a total of 250 million smart meters are planned to be installed during the scheme period. In the first phase, by December 2023 about 100 million prepaid smart meters will be installed in all electricity divisions of 500 AMRUT cities with AT&C losses of over 15 per cent, all union territories, all industrial and commercial consumers (including MSMEs), all government offices at the block level and above, and other areas with high losses. Progress will be monitored closely, especially in government offices, to enable their installation in a time-bound manner.
The scheme also envisages the installation of feeder meters for agricultural connections owing to the scattered nature of agricultural connections and their remoteness from habitations. In addition, it proposes system metering at the feeder and distribution transformer (DT) level with communication features in PPP mode.
Implementation of new technologies: Artificial intelligence (AI) will be leveraged to analyse the data generated through IT/OT devices including system meters and prepaid smart meters to prepare energy accounting reports every month. These reports will enable discoms to take informed decisions on loss reduction, demand forecasting, time-of-day tariffs, renewable energy integration and predictive analysis. This would contribute towards enhancing the operational efficiency and financial sustainability of the discoms. Funds under the scheme will also be used for the development of AI applications in the distribution sector.
Grant for smart meters: For prepaid smart metering, all special category states including Sikkim and the states/UTs of Jammu & Kashmir, Ladakh, Himachal Pradesh, Uttarakhand, Andaman & Nicobar Islands, and Lakshadweep will receive a grant of Rs 1,350 or 22.5 per cent of the cost of one consumer meter, whichever is lower. The “other than special category” states will receive a grant of Rs 900 or 15 per cent of the cost of a consumer meter, whichever is lower. In addition, the discoms can avail of an additional special incentive of 50 per cent of the aforementioned grants if they install the targeted number of smart meters by December 2023. For works other than smart metering, maximum financial assistance given to discoms in “other than special category” states will be 60 per cent of the approved cost, while for discoms in special category states, the maximum financial assistance will be 90 per cent of the approved cost.
Power supply to agriculture: A major focus of the scheme is improving electricity supply for farmers and providing electricity to them during the daytime through the solarisation of agricultural feeders. Under the scheme, work on separation of 10,000 agricultural feeders will be taken up through an outlay of nearly Rs 200 billion. This will help farmers as dedicated agricultural feeders will ensure reliable and quality power. This scheme converges with the Pradhan Mantri Kisan Urja Suraksha Evem Utthan Mahabhiyan (PM-KUSUM) scheme, which aims to solarise all feeders, and provide avenues for additional income to farmers.
Modernisation of the distribution system: The scheme also entails the modernisation of the distribution system in urban areas through supervisory control and data acquisition (SCADA) systems in all urban areas and distribution management systems (DMS) in 100 urban centres.
The way forward
The discoms are expected to prepare an action plan with reform measures for loss reduction, metering, distribution infrastructure works, and results evaluation framework after consultation with the nodal agencies. These actions plans will be approved by the state cabinet and the central government’s interministerial monitoring committee.
Some indicative measures for loss reduction are timely issuance of tariff orders, truing up, multi-year tariffs, liquidation of regulatory assets, publishing and reporting of energy audits, corporate governance reforms, private sector participation through franchisees, PPP, privatisation or joint ventures, training and capacity building of existing manpower, strengthening of the IT wing for management of IT/OT services, setting up of electricity police stations in line with the provisions of the Electricity Act, 2003, a mechanism for the payment of subsidy as per Section 65 of the Electricity Act, 2003, subsidy delivery through direct benefit transfer for improvement in accountability, and publishing of quarterly and annual accounts.
For metering and distribution infrastructure strengthening, discoms may take measures such as deployment of aerial bunched cables in high loss areas, agricultural feeder segregation, bifurcation of feeders and other allied works, high voltage distribution system (HVDS) implementation, IT/OT enablement works, installation of new feeders, capacitors, substations and lines, and implementation of SCADA and DMS.
In sum, the new scheme surely spells good news for discoms, which have been struggling, particularly over the past year and a half, owing to the effects of the pandemic on electricity demand and payment collection. The enhanced focus on prepaid smart metering is expected to push discoms to turn over a new leaf and work towards smart metering in mission mode.