The Revamped Distribution Sector Scheme (RDSS) is a flagship programme of the Indian government, which was launched in FY 2021 to reform the power distribution segment. Since then, the scheme has made a remarkable impact on the operational and financial performance of discoms, besides driving up the pace of smart meter installation. At Power Line’s recent conference on Power Distribution in India, Rahul Dwivedi, Executive Director, REC Limited, spoke about the scheme’s progress and impact, key initiatives being implemented, challenges and priorities in the next 6-12 months. Excerpts…
The RDSS is a reform-based, result-linked initiative aimed at enhancing the operational efficiency and financial sustainability of discoms. Financial disbursements to discoms are based on parameters that are defined at the beginning of the scheme. It has a total budget of Rs 3,037.58 billion over five years (2021-22 to 2025-26), with 50 per cent allocated for the smart metering programme, which is a focal area of the scheme. The other 50 per cent is for loss reduction and strengthening and modernising the distribution infrastructure.
REC Limited and PFC Limited are the nodal agencies that were assigned to oversee the scheme’s implementation, monitoring and evaluating retailed project reports, and coordinating with discoms, in addition to capacity building and personnel training.
The RDSS is different from previous schemes that were launched. First, it introduces greater stakeholder accountability. The scheme guidelines emphasise a larger share of investments from stakeholders. The scheme also establishes a set of pre-qualification criteria, ensuring adherence to a minimum benchmark for participation. The release of funds is tied to the results/performance of the participating discoms. Another differentiator is that reforms planned are customised to discom-specific needs rather than a one-size-fits-all approach. The evaluation of parameters is objective, with clearly defined targets and timelines. Incentives are provided to discoms for expediting the scheme’s implementation and achieving the set targets/trajectories. Further, payments to suppliers and contractors have been delinked from the release of grants by the government.
For quality checks, discoms are required to submit proposals for smart metering and loss reduction works. Nodal agencies then appraise the proposals and align these proposals with regard to guidelines in case of any deviations. The monitoring committee then sanctions the proposals after the consideration of inputs from different stakeholders. Weekly review meetings are held between discoms, nodal agencies and the Ministry of Power to ensure the works progress smoothly.
Progress so far
A total of 200 million smart meters have been sanctioned, of which around 60 per cent (120 million smart meters) have been awarded so far, while 3.4 per cent (6.8 million meters) of smart meters have been installed by discoms. Six states account for 90 per cent of the installed meters, led by Assam (32 per cent), Bihar (25 per cent), Madhya Pradesh (15 per cent), and followed by Chhattisgarh, Andhra Pradesh and Maharashtra, each contributing more than 5 per cent.
In the case of DT metering, 5.2 million meters have been sanctioned, of which 86 per cent (4.5 million meters) have been awarded and 3.5 per cent (182,000 meters) installed. Maharashtra and Assam are front runners in this category, together contributing approximately 50 per cent of the installed DT meters.
Meanwhile, for feeder metering, of the 190,000 meters sanctioned, around 73 per cent of the meters have been awarded and 30 per cent installed. Maharashtra and Uttar Pradesh are the front runners in this area, jointly contributing about 60 per cent of the installed feeder meters.
On the financial side, a gross budgetary support (GBS) of Rs 240.15 billion has been sanctioned for smart metering projects, with Rs 4.06 billion (1.7 per cent) released to date.
Under loss reduction initiatives, substantial work has been done particularly in the installation of low tension (LT) lines, high tension (HT) lines and DTs. For LT lines, a total of 1.04 million ckt km has been sanctioned, with 87 per cent awarded and 22 per cent installed. In the case of HT lines, 834,000 ckt km has been sanctioned, with 77 per cent awarded and 10 per cent installed. Further 521,000 DT units have been sanctioned, with 90 per cent (469,000) awarded and 10 per cent (49,000) installed. The government has sanctioned a GBS of Rs 892.95 billion for these initiatives, of which 20.5 per cent
(Rs 182.84 billion) has been released.
Impact of the RDSS
The RDSS has made a significant impact on the financial and operational performance of discoms. The average cost of supply-average revenue realised (ACS-ARR) gap (cash adjusted) has decreased from Re 0.85 per kWh in FY 2021 to Re 0.45 per kWh in FY 2023. However, the ACS-ARR gap in FY 2023 stood at Re 0.55 per kWh, up from Re 0.33 per kWh in FY 2022, primarily due to a steep increase in national power purchase costs driven by the rising power demand and global geopolitical challenges. Additionally, subsidy disbursal saw a remarkable improvement, with over 100 per cent of booked subsidies disbursed in FY 2022 and FY 2023, compared to a shortfall in FY 2021. Among the 24 states providing tariff subsidies, 21 states disbursed 100 per cent or more of the booked amounts, resulting in a national aggregate of 108 per cent of the booked subsidy being disbursed in FY 2023.
The improvement in ARR was further supported by loss-takeover subsidies disbursed by state governments in Tamil Nadu, Telangana, Andhra Pradesh, Bihar, Rajasthan and Uttar Pradesh. These grants totalled over Rs 436 billion in FY 2023, compared to Rs 232 billion in FY 2022, contributing to an increase in the national ARR by Re 0.14 per unit. Overall profitability before tax also improved, largely driven by increases in non-tariff subsidies.
Operationally, discoms demonstrated substantial progress. Aggregate technical and commercial (AT&C) losses have improved significantly to 15.4 per cent in FY 2023 from 16.23 per cent in FY 2022 and 21.91 per cent in FY2021. This improvement was driven by enhanced billing efficiency, which rose to 87 per cent in FY 2023 from 86.1 per cent in FY 2022. Additionally, six utilities–Manipur State Power Distribution Company Limited (MSPDCL), Madhyanchal Vidyut Vitaran Nigam Limited (MVVNL), Purvanchal Vidyut Vitaran Nigam Limited (PuVVNL), TP Central Odisha Distribution Limited (TPCODL), TP Western Odisha Distribution Limited and Ladakh Power Development Department (PDD)–achieved an AT&C improvement of over 10 per cent in FY 2023 compared to FY 2022.
Billing efficiency has improved, rising approximately 1 per cent from FY 2022 to FY 2023 and 2 per cent from FY 2021 to FY 2022. Collection efficiency remained high at 97.3 per cent in FY 2023. Furthermore, 23 utilities achieved 100 per cent collection efficiency in FY 2023, while 45 utilities recorded collection efficiencies of 97 per cent or higher in FY 2023.
Notably, Assam, which leads in smart metering, saw around Rs 2 billion saved by consumers over the six-month period from April to September in FY 2025, with 17 per cent less consumption noted on prepaid meters compared to the corresponding period of FY 2024 on postpaid meters. In Madhya Pradesh, where around 68,729 meters have been installed, savings of almost Rs 2.91 billion per year were achieved with smart meters on non-agricultural feeders.
Issues and challenges
A major challenge has been the delay in the implementation of works at the field level, coupled with non-adherence to certain pre-qualification parameters by select states. These issues adversely impacted the annual evaluation process and, consequently, the disbursal and utilisation of funds. There have also been delays in awarding works due to prolonged price negotiations, low bidder participation in specific regions, and the formulation of direct debit facilities for smart metering projects.
Some states in the north-eastern region face unique challenges due to their geographic terrain, supply chain constraints, shortage of skilled manpower, etc. Additionally, there has been consumer resistance in certain regions regarding the roll-out of prepaid smart meters.
There have also been state-level challenges due to difficulties in the implementation of standard operating procedures in the transition from post-paid to prepaid metering. These include challenges in the deployment of check meters and arrear recovery mechanisms, as well as the development of new incentive or rebate frameworks.
Further, concerns related to data privacy and cybersecurity have been a significant challenge. With the rapid implementation of smart metering, interoperability and vendor lock-in are emerging as critical concerns for discoms.
Key priorities and plans
In the next 6-12 months, the RDSS will focus on debottlenecking priorities through a targeted approach. Action plans will be developed to align the progress of the scheme with established timelines and targets, as outlined in the guidelines. The annual evaluation process is also being streamlined to optimise the fund disbursal mechanism. This involves the periodic monitoring of the PQ and results evaluation framework parameters for states. Timely evaluations will be conducted for all eligible states to ensure a smooth and timely flow of resources.
Additionally, an impact assessment will be conducted to recognise and celebrate early wins under the RDSS. This will help identify best practices and share success stories and learnings. States facing challenges in implementation will receive tailored support through workshops and field visits, enabling them to overcome barriers and accelerate progress.
Technology tools such as the RDSS portal and the National Feeder Monitoring System will be utilised to streamline processes, including data collection, monitoring, evaluation, gap identification and document verification. Consumer engagement will be a priority, particularly in addressing resistance to smart metering projects. Another focus will be on ensuring that cybersecurity and interoperability protocols are established and put in place to address any existing gaps and prepare for potential challenges associated with smart metering and other technological solutions.
Overall, these efforts collectively aim to enhance the efficiency, impact and sustainability of the RDSS, ensuring that progress remains aligned with its objectives and timelines.
