Views of Dr A.K. Verma

“The power sector is witnessing a transition”

Views of Dr A.K. Verma

The power distribution segment is witnessing significant changes because of renewed government focus on the segment through a plethora of schemes and a changing energy mix. At a recent Power Line conference, “Power Distribution in India”, Dr A.K. Verma, joint secretary, Ministry of Power (MoP), expressed his views on the key trends, challenges and outlook for the distribution segment. Excerpts…

Since the past six years that I have been in the power sector, I have been constantly listening to this statement that distribution is the weakest link in the power sector. However, I would rather say that distribution is the most critical link in the power value chain. You may invest any amount of money in generation, have the best transmission system, but if you do not have an effective distribution segment to serve consumers, the investment in the sector will falter. The distribution segment has not received enough attention in the past, as compared to the generation and transmission segments. At one point in time, we were working towards promoting the generation segment in a big way because of the power-deficit situation. Today, we have over 331 GW of generation capacity, over 380,000 ckt. km of transmission line length and more than 300 million consumers in the distribution segment.

Key trends

The power sector is witnessing a transition. With a target of 175 GW of renewable energy (including rooftop solar), the concept of generation, transmission and distribution is expected to become a bit complex and merge with each other. Moreover, the concept of prosumers is also emerging as consumers are installing rooftop power plants and becoming generators. Metering, accounting and billing aspects will change completely with distributed generation and transmission at high voltages of 765 kV or 1,200 kV will not be required.

Another change that is taking place in the sector is the increasing cost consciousness in the distribution segment. Earlier, none of the discoms took cognisance of the decline in revenues or increase in expenses. However, today, discoms are continuously monitoring their financial performance and aggregate technical and commercial (AT&C) losses, and are striving to reduce them. Similarly, on the consumer side, advocacy groups are working to inform consumers about cross-subsidisation in the tariff structure.

Significant developments are taking place to ensure universal access to electricity. In the past, a village was considered electrified if a distribution pole and lines were installed, even if all households did not have an electricity connection. Today, connecting a house is not enough; there has to be regular power supply to the consumer. Therefore, the definition of “electrification” is changing and unless all consumers get 24×7 power supply, they are not going to be satisfied.

Update on government schemes

A number of government schemes are under way to meet the objective of providing uninterrupted power to consumers. The most important of these is the Ujwal Discom Assurance Yojana (UDAY), which aims to turn around the debt-ridden discoms. Under the scheme, the state governments are taking over the debt of the discoms and this has greatly helped relieve their financial stress to a large extent. However, in terms of operational efficiency improvement, more steps need to be taken by the discoms.

Another important scheme is the Deendayal Upadhyaya Gram Jyoti Yojana, which focuses on the strengthening of the sub-transmission and distribution networks as well as extending grid supply to rural areas. Meanwhile, in urban areas, the Integrated Power Development Scheme is being implemented to ensure IT enablement of utilities and strengthen the distribution infrastructure.

The latest scheme is the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya), which aims to connect over 4 million unelectrified consumers to the grid by December 2018. This is a very difficult target to chase. Below poverty line households will be given free connections while others have the option of paying the connection cost in 10 equal monthly installments.

Under the Saubhagya scheme, we have allowed all the states to start project execution and seek financing from the central government. The major states where a large number of households are unelectrified are Uttar Pradesh, Bihar, Assam, Odisha, Madhya Pradesh and Jharkhand. Of these, Bihar has already conducted door-to-door surveys. In Uttar Pradesh, the task has been almost 50 per cent completed by the Rural Electrification Corporation and the state power department. Meanwhile, in Jharkhand, Madhya Pradesh, Odisha and Assam, the Department of Post is assisting in the surveys. The department has a large number of beat officers, almost 100,000, and they are connected to all the villages. Once the surveys are complete, the detailed project reports will be prepared and funds for electrification will be provided based on these reports. There is no fixed allocation of funds for each state.

Overall, a number of schemes are under implementation and though not everything is coming about at the pace we had envisaged, the results are encouraging.

Issues and challenges

A large number of unmetered domestic consumers are still supplied power at a flat rate. In this case, the discom does not have any incentive to provide 24×7 power  supply. The consumer also sees no driving factor to be energy efficient. Therefore, we are emphasising on large-scale metering and efficient billing practices. If adequate billing and collection mechanisms are not in place, the discoms will fail to generate revenue. In this context, prepaid and smart meters can prove to be ideal solutions. We are working towards bringing these technologies into the power sector although the investment requirement is very high. Besides, the capacity of meter manufacturers to cater to a large population is limited at present.

The way forward

As a result of UDAY and various other initiatives, the AT&C losses of discoms are expected to come down to 19 per cent in 2017-18. Financial losses are expected to reduce by Rs 110 billion-Rs 120 billion because of a decline in interest costs, power purchase costs and AT&C losses. Financial losses stood at Rs 430 billion in 2016-17.

In addition, the MoP is working to introduce a draft bill to enable the separation of carriage and content in the distribution segment. Since electricity is categorised in the concurrent list, the states also need to be taken on board to make the move. However, the separation of carriage and content alone is not going to serve the purpose unless carriage is robust enough.

Also, it must be noted that a huge target for renewable energy capacity addition does not imply that thermal power will be replaced. Even if we have 175 GW of renewable capacity by 2022, the total energy generation from it will only be about 20 per cent. Therefore, base load power supply will continue to rely on thermal power generation sources. The National Electricity Plan has accounted for these factors while planning the targets for the coming years.

As far as the decline in plant load factors of thermal power plants (TPPs) are concerned, it is expected to continue because, if we are targeting 24×7 power supply, the load will not be present continuously. Going forward, the flexibility of TPPs is expected to improve with advanced technology. In the case of stressed assets, the government is working to save them on a case-to-case basis.

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