Editorial February 2018

The power distribution segment has, in recent years, seen some radical reforms and initiatives
including UDAY, 24×7 Power for All and Saubhagya, and is set to see a few more. In the past few months, the government has announced its intention to work with the states to bring in reforms such as direct benefit transfer for better targeting of subsidies, implement the separation of carriage and content which would allow the operation of multiple supply licensees in the same area, impose penalties on discoms for unjustified load-shedding, rationalise tariff slabs, issue directives to states to allow private franchisees to take over loss-making areas, among others.

The modalities of most of these schemes are still being worked out and one will have to wait and see how these finally translate into actions. What is clear, however, is that the government faces significant pressure to deliver on the schemes that are already rolled out so as to create a strong baseline for future initiatives.

For instance, despite the initial green shoots that appeared in the UDAY scheme, analysts are worried about recent numbers. After registering a drop since 2014-15, AT&C losses, the cornerstone of operational performance improvements, have climbed up. For 2016-17, while the losses came down to 20 per cent, latest data on the UDAY portal shows that these were around 23 per cent at the end of the third quarter of 2017-18. The UDAY target of reducing AT&C losses to 15 per cent by 2018-19 now seems unlikely to be met, with big states such as Jharkhand, Bihar and Uttar Pradesh still reporting  significantly high losses.
The report card on other parameters such as reduction in revenue gap and smart metering is not quite impressive. There are many states where the ACS-ARR gap increased in 2016-17 over the previous year, while discoms have managed to achieve only 3 per cent of their targets for smart metering in the 500 kWh segment. States also have significant dues that remain to be cleared.

Further, while schemes like 24×7 Power for All have drawn praise, some are still worried about the quality of service or meaningful electrification that these schemes will be able to offer. There are concerns about the impact of adding non-remunerative consumers to discom networks, as these users may not be able to pay the full cost of service.

These are challenges that confront the government today and must be carefully handled, to keep the positive momentum generated by the reforms on track. Power Line’s Infocus section this month provides an in-depth analysis of the power distribution segment.

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