Editorial August 2018

The power distribution segment in India has begun to see pockets of successes in the past year or so.

Financially, discoms have become much stronger with UDAY. As per the latest government data, losses have decreased from Rs 515 billion in 2015-16 to Rs 346 billion in 2016-17. The revenue gap has reduced from Re 0.59 per unit in 2015-16 to Re 0.23 per unit in 2017-18. The average AT&C losses of the states have declined to around 19 per cent from over 20 per cent in the previous fiscal.

Among other sector achievements, the government’s ambitious rural electrification scheme reached an important milestone with India electrifying all villages in April this year, and the government is now confident of achieving the universal household electrification target by March next year.

Distribution franchising is picking up pace with UDAY and more states are looking to opt for this route. A few smart grid pilots went online last year. Efforts were made to bring in transparency in discom payments through a new portal, PRRAPTI. Further, the government got tough on lending to loss-making discoms.

That said, a few areas of serious concern still linger. There is limited progress in the signing of PPAs, AT&C losses are still far from the target of 15 per cent by 2019 for many discoms, while tariffs need to be more cost-reflective, say industry watchers. There has also been a lot of positive policy talk on separating carriage and content, introducing penalties for unscheduled load-shedding, strengthening open access regulations, setting up a national electricity discom, etc. But their implementation and enforcement by the states will be critical to ensure that the last-mile power distribution segment delivers on its promises.

Power Line’s Infocus section this month takes a closer look at the power distribution segment’s performance, issues and outlook.