The Centre is planning to launch another scheme to enable public sector power distribution utilities (discoms) to cut technical losses via “transition-financing” of the required capital expenditure.
The new scheme would follow the expiry of the Rupees 3-trillion Revamped Distribution Sector Scheme (RDSS) launched in FY22 for five years through FY26, a senior power ministry official. The proposed RDSS-II would have a similar aggregate outlay, and run for as many years as the current one, he added.
“Planning has started for the second phase of RDSS, which is likely to be launched after FY26… data is being collected on how much additional work the distribution sector requires to be strengthened to carry the load projected for 2030,” the official said.
RDSS provides for long-term concessional transition financing to the discoms, with an aim to reduce the discoms’ aggregate technical & commercial (AT&C) losses at pan-India level to 15%. It involves funding by state-run sector-specific lenders PFC-REC under irrecovable state government guarantee, and gross budgetary support of Rupees 97,631 crore by the Centre. According to the official data, as on date, total loan disbursed by PFC-REC under the scheme is Rupees 1.12 trillion for 16 states, while sanctioned amount is Rupees 1.33 trillion.
The finance ministry has allocated Rupees 12,000 crore for the same in the Union Budget for FY24, but total funds relased by the Centre for the scheme since its start are still below Rupees 6,000 crore. “Our primary objective rather than spending money is to control losses. If loss reduction is not satsifactory, the expenditure may slow,” the official said.
The extant RDSS has two components: financial support for prepaid smart/system metering and upgrade of the distribution infrastructure and, training and capacity building.
Under the scheme, no new projects have been sanctioned, and only projects already sanctioned by March-end 2022 were eligible to receive funds. However, projects sanctioned for Ayodhya under the Integrated Power Development Scheme and under Prime Minister’s Development Package 2015 were eligible to receive funds, till March 31, 2023.
The financial assistance is extended only after the discoms meet the pre-qualifying criteria and achieve the basic minimum benchmark in reforms. The move to have a second version of RDSS can be attributed to the discoms’ losses tending to rise again. “The programme aims at 15% reduction (in AT&C losses) by the end of the scheme (FY26). But now it has gone up again this year as collections are usually poor in the election year,” the official said.
Further, the official highlighted that many states have apparently not been transparent about revealing the AT&C loss figures and may be drawing money without any actual reduction in losses. “More or less, the states are complying. But some states have started (tweaking) the figures, particularly Uttar Pradesh and Bihar,” the official said.
In FY22, India’s AT&C losses stood at 16.5%, down from 22.3% in FY21, the latest data from the power ministry showed. The data for FY23 and FY24 is under evaluation. Similarly, the gap between average cost of supply and average revenue realisation declined to 40 paise per kwh in FY22 from 69 paise per kwh in FY21. The scheme aims to eliminate this gap by FY25.
“The (funds) will not be a problem because this is the only flexible scheme in the power sector. Part of total revenue available with the government has to be (used) for development of the power sector,” the official said.
According to the power ministry, the government has so far identified 57 discoms from 32 states and Union Territories under the scheme and has prepared detailed project reports for these. “Till today, detailed project reports having total outlay of Rupees 1.2 trillion has been approved for loss reduction works and Rupees 1.3 trillion has been approved for smart-metering works,” power minister RK Singh said in a reply to Parliament earlier this month.
But the progress on the ground is still to be visible, and it may come with a lag. “If you look at the overall progress of the scheme, the sanctioned meters are somewhere around 220 millon and we have installed only about 0.8 milion so far,” said Vikram V, vice-president & sector head, corporate ratings, Icra. “The scheme has to pick up and that is supposed to bring down the inefficiency in the collection system.”
As per analysts, the installation of smart meters has lagged behind because of the lack of manufacturing ecosystem and the delay in tendering activity. “All of it takes time therefore the government is likely thinking of extending the scheme,” Vikram said.
“If the government plans to extend the scheme beyond FY26 that implies the scheme has had positive outcome and still there is lot of work to be accomplished. Continuation of scheme would ensure broader and intense coverage. This will lead to sustainable benefits in the distribution segment,” said Ashok Khurana, director general of Association of Power Producers.