Economy
₹3 trillion power distribution scheme may get extension
Summary
- Under this scheme, the government is looking to connect hundreds of new households that weren’t covered under earlier universal electrification, as well as facilitate installation of smart meters across the country
NEW DELHI : The government may extend a scheme aimed at strengthening India’s power distribution infrastructure beyond its intended five-year duration as it seeks to connect more households, especially in rural areas, to the electricity grid.
The Revamped Distribution Sector Scheme (RDSS), which has an outlay of ₹3 trillion for financial years 2021-22 to 2025-26, may now be extended beyond the five-year period to support increasing demand for electrification, two people aware of the matter said.
“RDSS may continue for another five years. It will move on into the next finance commission period," one of them said. Recommendations of the 16th Finance Commission will be effective from 1 April, 2026.
The government had introduced the scheme to help power distribution companies improve their operational efficiency and financial sustainability as it pushed for universal household electrification.
Two earlier programmes—Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) and Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY)—had ended in 2022.
The ministry of power did not reply to queries on the plan to extend RDSS beyond FY26.
Responding to a question in Parliament recently, Union power minister R.K. Singh said the government was supporting states under RDSS to provide electricity to households not covered by earlier schemes.
So far, nearly 500,000 households in Rajasthan, Uttar Pradesh and Andhra Pradesh have been approved for electrification under the new scheme.
“The Saubhagya scheme connected households (that existed during its period)... But with growth in new houses, demand always grows," said the second person mentioned above.
“Even then, many villages were connected through solar and not through the grid. Now, they need grid connectivity. The extension is being done under RDSS."
RDSS has two elements –financial support for prepaid smart metering and system metering, and upgradation of the distribution infrastructure.
The scheme’s ₹3 trillion outlay includes expenditure by the Centre and states, besides financing from state-owned power sector lenders like Power Finance Corp. and Rural Electrification Corp. The Centre alone plans to spend ₹97,631 crore for the scheme. The finance ministry allocated ₹12,000 crore for the scheme in the Union budget for FY24.
RDSS was introduced to strengthen financial discipline in the distribution sector and to bolster the distribution infrastructure to provide uninterrupted electricity. The scheme is applicable to all state power distribution companies and power departments. The government has so far approved action plans and detailed project reports for 30 states and union territories under the scheme, according to the power ministry.
“Till today, DPRs having total outlay of ₹1.2 trillion have been approved for loss-reduction works and ₹1.3 trillion have been approved for smart-metering works," power minister Singh said in his reply to Parliament.
Nearly 250 million pre-paid smart metres are to be deployed across states. With the sanctioned amount, states and union territories plan to deploy about 5.2 million distribution transformer smart metres and 188,000 feeder smart metres under RDSS. So far, only about 8 million smart metres have been installed.
Vikram V, vice president & sector head, corporate ratings, ICRA said: “The progress in installation of smart meters remains slow with only about 80 lakh smart metres installed so far against the sanctioned 22 crore meters under the RDSS scheme. In this context, extension may be required in the scheme timeline."
RDSS also targets reducing aggregate technical and commercial losses to pan-India levels of 12-15% and eliminating the gap between the average cost of supply and average realizable revenue by FY25.
Technical and commercial losses of power distribution companies dropped from 22.32% in FY21 to 16.44% in FY22. The gap between the average cost of supply and average realizable revenue declined from ₹0.69/kWh in FY21 to ₹0.15/kWh in FY22.
