Power Sector DISCOMs and RDSS | 07 Feb 2022

Distribution serves the most vital function in India’s power supply chain, yet it is also possibly the weakest link. The Power sector DISCOMs in India continue to suffer from issues like AT&C Losses, lack of adequate investments and metering issues.

The Revamped Distribution Sector Reform Scheme (RDSS) was launched to specifically overcome the operational deficiencies and financial constraints of the discoms, but the scheme itself suffers from implementation issues.

To leverage various opportunities offered by the RDSS, the states must emphasize the need for flexibility in prioritizing investments in their action plans. This effort also needs to be accompanied by fulfilled commitments towards accelerated but deliberate implementation.

Power Sector Discoms

What are the Challenges Faced by the Power Sector DISCOMs?

• The discoms suffer Aggregate Technical and Commercial (AT&C) Losses.
  • Technical Loss: It is due to the flow of power in transmission and distribution systems.
  • Commercial Loss: It is due to the theft of electricity, deficiencies in metering, etc.
• In the past decade, more than Rs 50,000 crore has been invested in rural networks, however, actual investments have been much less than planned.
• Moreover, the transformer and substation capacities in these areas were designed to meet this minimal demand of 250 or 500 watts assuming the consumption of only lights, fan and TV and not of appliances like refrigerators and mixers.
• About 25% of electricity sales is too highly subsidized, agricultural consumers also receive erratic, poor quality supply.
• Despite efforts, unmetered consumers and non-functional meters at the consumer and feeder level persist.
  • Without functioning meters, accurate energy accounting and loss monitoring is a challenge.

What Initiatives have been launched for Power Sector DISCOMs?

• The Revamped Distribution Sector Reform Scheme (RDSS), launched in July 2021, is the latest central government grant-based programme towards electricity distribution network investments.
• Earlier, schemes like Accelerated Power Development Programme (an urban loss reduction scheme), PM SAUBHAGYA (rural connections and network expansion focussed scheme), Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and Ujwal Discom Assurance Yojana (UDAY) have played a significant role in increasing access and improving performance of power sector DISCOMs of India.

Revamped Distribution Sector Reform Scheme (RDSS)

What is the RDSS?

• It aims to improve the operational efficiencies and financial sustainability of discoms (excluding Private Sector DISCOMs).
  • It will provide conditional financial assistance to strengthen the supply infrastructure of discoms.
• Half of the outlay is for better feeder and transformer metering and pre-paid smart consumer metering. The remaining half, 60% of which will be funded by central government grants, will be spent on power loss reduction and strengthening networks.
• It is an umbrella programme merging all the existing power sector reforms schemes - Integrated Power Development Scheme, DDU Gram Jyoti Yojana, and Pradhan Mantri Sahaj Bijli Har Ghar Yojana will be merged into this umbrella program.
• Rural Electrification Corporation and Power Finance Corporation are the nodal agencies for the implementation of this programme.

What are the Issues Associated with RDSS?

• RDSS has inherited several design issues from its predecessors including complex processes and conditions for fund disbursal.
  • Only 60% of the total Rs 2.5 lakh crore grants allocated in past schemes were disbursed.
• Lack of public review and regulatory oversight in states is another issue. The prescriptive approach of the scheme design impedes effective implementation.
  • The scheme emphasizes loss reduction investments over system strengthening.
  • However, high losses are typically connected to sustained poor quality service which, in turn, is affected by inadequate investment in system strengthening.
• RDSS stipulates universal pre-paid metering but post-paid options may be more suitable in many contexts.

What is the Way Forward?

• Strengthening Rural Networks: It is important to strengthen rural networks to meet the growing demand. Increased supply hours, appliance usage and the needs of rural enterprises will need more network investment.
  • Without this, the risk of power outages is high. The RDSS system’s strengthening plans can focus on this challenge.
• Fulfilling the Requirements of Agricultural Consumers: Under the PM-KUSUM scheme, day-time, low-cost supply can be provided to a large number of farmers by installing megawatt scale solar plants, which supply eight hours of quality power directly to dedicated agricultural feeders.
  • This would address farmers’ demand for reliable supply and almost halve the discom’s cost and subsidy requirements.
  • RDSS prioritizes investments and grants towards dedicated agricultural feeders to accelerate feeder solarisation. This grant support can provide reliable supply and reduce subsidy requirements.
• Automatic Metering of Distribution Feeders: Often, discoms under-estimate losses by over-estimating unmetered consumption in a bid to demonstrate loss reduction.
  • For greater veracity, all feeders must be equipped with meters capable of communicating readings without manual intervention. States should leverage RDSS’s emphasis on automatic meter reading for this.
• Role of States: States shall identify implementation issues and adopt suitable strategies for metering and evolve frameworks for assessing benefits vis-a-vis the costs.
  • In their action plans, states should emphasize the need for flexibility and allow the discoms to make an informed choice between prepaid and postpaid metering.
  • Also, the state regulator must stipulate a framework to evaluate cost reduction and performance improvement due to smart meters and protect consumers from undue tariff impacts due to such investments.
  • Central government agencies should also be flexible in the monitoring, tracking and fund disbursal mechanisms.