Home >Budget 2019 >Budget Expectations >Budget may announce 2.86 trillion electricity distribution scheme
State-run PFC and its subsidiaries may be made nodal agency for implementing scheme. (Priyanka Parashar/Mint)
State-run PFC and its subsidiaries may be made nodal agency for implementing scheme. (Priyanka Parashar/Mint)

Budget may announce 2.86 trillion electricity distribution scheme

  • Scheme involves cutting losses, negating tariff gaps, setting up smart meters across 250 mn households
  • Centre will provide funding of up to 1.1 tn for the scheme, which will work in three phases till 2024

NEW DELHI : The National Democratic Alliance (NDA) government’s plan for India’s most ambitious distribution reform scheme involves reducing electricity losses to less than 12%, negating tariff gaps and having compulsory prepaid smart metering across the power distribution chain including 250 million households, said two government officials.

The 2.86 trillion scheme aimed at ensuring continuous power supply to all residents involves adopting models such as privatizing state-run power distribution companies (discoms) and having multiple supply, network and distribution franchisees.

The scheme tentatively named Atal Distribution System Improvement Yojana (ADITYA) after former prime minister late Atal Bihari Vajpayee may be announced in the Union budget to be presented on 1 February, with the Centre providing funding of up to 1.10 trillion.

“The aimed reduction in aggregate transmission and commercial (AT&C) losses is less than 10% in urban areas and less than 15% in rural areas. Nothing has been tried for India’s distribution sector on this scale," said one of the government officials cited above who did not want to be named.

Business Standard reported about the scheme on 7 December.

The scheme assumes importance as some of the states are recording power distribution losses of as high as 50%. Electricity discoms are the weakest link in the electricity value chain, plagued by low collection, increase in power purchase cost, inadequate tariff hikes and subsidy disbursement, and mounting dues from government departments. Discoms owe 80,656 crore at the end of October for power bought from generation companies (gencos).

According to government documents reviewed by Mint, the scheme would work in three phases till March 2024. After completing compulsory smart metering ecosystem across the distribution sector—starting from electricity feeders to the consumer levels—in the first phase, the second phase will involve loss reduction measures such as insulated aerial bunched cables to prevent pilferers using hooks on the non-insulated cables to tap free electricity, separate feeders for agricultural and rural household consumption, and installing supervisory control and data acquisition (Scada) systems for better monitoring and consumer experience. The third phase will involve training and capacity building.

State-run Power Finance Corp. Ltd (PFC) and its subsidiaries will be the nodal agency for implementing the scheme.

Queries emailed to the spokespeople of the ministries of finance and power on 8 January and 13 January remained unanswered till press time.

States with more than 18% AT&C losses can opt for an infrastructure support reform package that entails choosing an option between running discoms in the public-private-partnership (PPP) model or inducting multiple supply and network franchisees or working through input-based distribution franchisees.

The above mentioned discom models are being contemplated after the previous plans of the separation of carriage and content failed to gain traction from the states. The government plans to convert all electricity meters into smart prepaid meters by 2022.

Successive governments have been promoting the separation of the carriage and content operations of existing discoms. Carriage refers to the distribution aspect and content to power.

“With the dismal fiscal health of discoms, it will provide much needed investment funds for network infrastructure. Hopefully discoms join the reforms packages. Focus on smart metering is commendable but discoms have failed in metering 100% of their retail consumers for over two decades inspite of nudging from Central government due to vested interests. Success of metering will determine success of scheme. Uday failed on metering goals," said Sambitosh Mohapatra, partner, power and utilities at PwC India.

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