Distribution Hope

IPDS sets the pace for segment revival

Things are looking up for the distribution segment with a number of initiatives taken by the government for its revival. The Integrated Power Development Scheme (IPDS) launched in December 2014 is one such initiative. Though the impact of this over Rs 700 billion programme is yet to be fully seen, the government is hopeful that the states will start delivering results at the earliest.

Overview

The IPDS is the government’s flagship programme for urban areas to help the states strength their distribution infrastructure and ensure information technology (IT) enablement. The erstwhile Restructured Accelerated Power Development and Reforms Programme (R-APDRP) has been subsumed in the scheme.

The key focus areas of the scheme are to strengthen urban distribution infrastructure, ensure enhanced power reliability, and reduce aggregate technical and commercial (AT&C) losses. These losses translate into nearly Rs 50 billion annually. Hence, the scheme requires states to lower their losses as per a trajectory finalised by the Ministry of Power (MoP) in consultation with the states.

The Power Finance Corporation (PFC) is the nodal agency for implementing the scheme. All discoms (including the private sector) and state power departments serving urban areas are eligible for participating in the scheme. Projects under the scheme are to be completed within two years from the issue of letters of award. Utilities are required to appoint a project management agency for monitoring and ensuring the timely implementation of the project.

The four major components of the scheme are network strengthening, metering, IT enablement and solar rooftop. The estimated cost of the scheme is Rs 326.12 billion, which includes a budgetary support of Rs 253.54 billion from the government. The IT enablement component and distribution network strengthening approved by the Cabinet Committee on Economic Affairs in June 2013 in the form of the R-APDRP has been subsumed in this scheme. Subsequently, the outlay of Rs 440.11 billion (including a budgetary support of Rs 227.27 billion) has been carried over to the IPDS.

Under the R-APDRP, 1,405 towns were selected based on Census 2001 (with a population of more than 10,000 for special category states and 30,000 for other states) and sanctioned in the year 2009-10. However, the IPDS has been extended to all the statutory towns irrespective of population criteria and projects have already been sanctioned for 3,583 towns across 29 states.

Funding mechanism

As far as funding is concerned, the government will offer 60 per cent of the project cost as grants (85 per cent for special category states). Discoms have to contribute at least 10 per cent of the cost (5 per cent for special category states) and avail of the remaining cost in the form of loan. The discom contribution can, however, go up to 40 per cent (15 per cent for special category states). In case the discom does not avail of the loan, the maximum eligible additional grant will be 15 per cent (5 per cent for special category states) on achievement of prescribed milestones.

An additional grant (that is, conversion of 50 per cent of the loan component) under the scheme will be released in case of project completion within the approved time schedule, reduction in AT&C losses as per the finalised trajectory and upfront release of admissible revenue subsidy by the state governments based on metered consumption. Therefore, the maximum grant by the government is around 75 per cent under the scheme (90 per cent for special category states). The government also provides 100 per cent grant for bridging the missing links of the National Optical Fibre Network, providing training and capacity building, and establishing the National Power Data Hub under the scheme.

Conclusion

The IPDS is being implemented at a brisk pace across the country. While works have already begun in four to five states, tenders have been floated for the remaining states. PFC is optimistic that works will commence in these states by March 2017 or even earlier.

In spite of the poor health of the distribution companies, the IPDS seems to be more promising than the R-APDRP in terms of its approach, funding mechanism, coverage of towns, scope of work, etc. However, proper implementation of the scheme will determine its success.

Figures sourced from www.ipds.gov.in and www.urjaindia.co.in

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