Support Schemes

Update on government programmes for the distribution segment

The power distribution segment has witnessed a series of central initiatives in the past few years aimed at improving the financial and operational health of discoms. The key amongst

these is the Ujwal Discom Assurance Yojana (UDAY), which ran between November 2015 and March 2019, and was launched to reduce the aggregate technical and commercial (AT&C) losses of discoms to 15 per cent and eliminate the gap between the average cost of supply and the average revenue realised (ACS-ARR). With the expiry of the term of UDAY, the government is now reportedly working on another programme, which is expected to be a performance-linked reform scheme, to revive the ailing state power distribution utilities.

An update on the performance, progress and targets of the various distribution segment programmes…

UDAY

Under UDAY, 27 states and five union territories (UTs) signed MoUs with the Ministry of Power (MoP). Of these, 16 states signed comprehensive MoUs and 11 states and five UTs signed MoUs for operational improvement only. Under the scheme, the states took over 75 per cent of the debt of their distribution utilities by way of bonds to help ease their debt burden. The pre-UDAY debt of the 16 UDAY states that signed comprehensive MoUs was Rs 3,240 billion, as of September 30, 2015. The outstanding loans at the end of 2018-19 stood at Rs 3,512.91 billion, of which Rs 633.55 billion is to be converted into grants by the states.

Since the launch of UDAY, AT&C losses have been declining consistently, coming down from 20.81 per cent in 2015-16 to 20.2 per cent in 2016-17, 18.7 per cent in 2017-18 and to 18.19 per cent in 2018-19. This is higher than the targeted loss reduction level of 15 per cent, that was to be achieved by March 2019. Moreover, the results vary greatly across states. Meanwhile, the ACS-ARR gap decreased from Re 0.60 per kWh in 2015-16 to Re 0.41 per unit in 2016-17, Re 0.17 per unit in 2017-18 and then increased to Re 0.27 per kWh in 2018-19. The UDAY states have shown an improvement in annual book losses from Rs 515.62 billion in 2015-16 to Rs 378.77 billion in 2016-17 to around Rs 150.5 billion in 2017-18, which then increased to Rs 272.5 billion in 2018-19.

With respect to progress on metering targets, 100 per cent feeder metering has been achieved in rural and urban areas, while 64 per cent and 88 per cent distribution transformer metering has been achieved in rural and urban areas, respectively portal as of August 2020 as per the UDAY. On the smart metering front, progress has been rather slow, with 6 per cent smart metering achieved for consumers with per month consumption of above 500 kWh (of the targeted 5.7 million), while for consumers with per month consumption over 200 kWh and below 500 kWh, 8 per cent progress has been achieved so far (out of the targeted 18.42 million consumers).

IPDS

Launched in 2014, the Integrated Power Development Scheme (IPDS) aims to provide quality and reliable 24×7 power supply in urban areas. The scheme is designed to aid AT&C loss reduction, establishment of IT-enabled energy accounting/auditing, improvement in billed energy based on metered consumption and improvement in collection efficiency. The programme, excluding the Restructured Accelerated Power Development and Reforms Programme (R-APDRP) component, has an estimated outlay of Rs 320 billion, including budgetary support of Rs 253.54 billion from the government during the entire implementation period. Besides, the R-APDRP cost of Rs 440.11 billion, including budgetary support of Rs 227.27 billion as already approved by the Cabinet Committee on Economic Affairs, has been carried forward to the new scheme of the IPDS, in addition to the outlay for other components.

As of August 2020, a total of Rs 320.59 billion has been sanctioned under the scheme. This includes a government grant of Rs 201.03 billion, of which Rs 138.59 billion has been released. Of the total sanctioned outlay, Rs 282.59 billion is for system strengthening of the sub-transmission and distribution network, Rs 9.85 billion for IT enablement of 1,931 towns in 24 states, Rs 7.92 billion for enterprise resource planning (ERP) to improve the workflow performance in 39 discoms, Rs 8.34 billion for smart metering (under which about 4.1 million smart meters are being deployed by 21 discoms), and the remaining is for substation monitoring and installation of gas-insulated substations. For the real-time data acquisition system, which functions like a mini SCADA system to improve feeder-level performance, over Rs 2 billion has been sanctioned.

In terms of physical progress, 30,350 ckt. km of overhead lines have been installed as of March 2020, and 67,851 ckt. km of underground/aerial bunched cables have been laid. Further, 868 new substations have been set up while 1,442 existing substations have undergone capacity augmentation. As of August 2020, go-live (including IT enablement under the erstwhile R-APDRP) stands completed in 1,970 out of 3,225 towns, 57 out of the 59 SCADA control centres have been commissioned and ERP has been implemented in 11 out of 39 discoms. Also, as per an impact assessment study conducted in 250 towns across 46 discoms, 220 towns (88 per cent) showed a reduction in AT&C losses, of which 109 towns reached the 15 per cent level. Also, 1.87 million smart meters have been installed, mainly by EESL.

Saubhagya and DDUGJY

Saubhagya was launched in September 2017 with the aim of providing electricity to every willing household in both rural and urban areas by March 2019. The scheme is aimed at providing last-mile connectivity to individual households, as against village electrification targeted under earlier electrification schemes. The scheme has an outlay of Rs 163.2 billion including a gross budgetary support of Rs 123.2 billion from the Government of India. The grant disbursed under Saubhagya was Rs 27.09 billion in 2018-19. In 2019-20 (up to May 31, 2019), a grant of Rs 910 million had been disbursed.

As of March 31, 2019, all the states declared 100 per cent electrification of households, except 18,734 households in left-wing extremist-affected areas of Chhattisgarh. Subsequently, seven states – Assam, Chhattisgarh, Jharkhand, Karnataka, Manipur, Rajasthan and Uttar Pradesh – reported 1.9 million unelectrified households, which were earlier unwilling, and were now willing, to get electricity connections. The states were asked to electrify these households under Saubhagya by December 31, 2019. However, of the 1.9 million households, only 1.07 million households were electrified up to January 31, 2020. Most of the remaining households (650,000) are in the state of Uttar Pradesh.

Launched along with the IPDS in December 2014, the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) targets the electrification of all villages and strengthening of the sub-transmission and distribution infrastructure in rural areas. Projects worth Rs 434.39 billion have been sanctioned under the DDUGJY. Additional projects worth Rs 142.7 billion have been sanctioned for the creation of additional infrastructure to cater to the requirement of household electrification under the Saubhagya scheme. The DDUGJY is effective till 2021-22. Funds disbursed under the scheme stood at Rs 164.65 billion in 2018-19 and Rs 4.3 billion in 2019-20 (up to May 31, 2019).

In terms of physical infrastructure as of March 2020, decent progress has been achieved under the scheme in terms of village electrification. Feeder separation, involving 100,901 ckt. km of 11 kV lines, has been completed. Achievements under the system strengthening component include the establishment/augmentation of 3,190 new substations, installation of 497,268 distribution transformers, and installation of 355,708 km low tension and 176,045 km high tension 11 kV and 33/66 kV lines. The reasons for the slow progress in some of the states are delays in the award of contracts and grant of forest and railway clearances, besides land acquisition, right-of-way and law and order issues, and difficult terrain.

NSGM

Under the National Smart Grid Mission (NSGM), 11 pilot smart grid projects, which were launched in 2013 by the MoP, have been declared go-live, approximately 156,000 smart meters have been installed, and eight projects have reached financial closure. The Assam, Tripura and Telangana projects are expected to achieve financial closure by December 2020, for which impact assessment has been completed. Some of the key findings from these projects are; six pilots exceeded their AT&C loss targets, smart grid systems have been integrated with R-APDRP in Tripura, Assam and West Bengal pilots, and remote connect/disconnect has been tested at all pilots. Further, two smart grid projects in Bilaspur and Raipur, being developed by Chhattisgarh State Power Distribution Company Limited, are currently under consideration. Apart from this, five smart grid projects have been sanctioned to cater to 810,000 consumers, and are at various stages of development. Around 750,500 smart meters are expected to be installed as part of these five NSGM projects being carried out in Chandigarh, Jharkhand, Odisha and Rajasthan. As of August 2020, the projects being implemented by the Chandigarh Electricity Division (CED), excluding subdivision-5, JBVNL and OPTCL are at the tendering stage while projects in CED subdivision-5 and JVVNL are under implementation.

The way forward

Overall, with the sector facing a reduction in power demand in the wake of the Covid-19 pandemic and the nationwide lockdown, the discoms’ operational and financial performance will remain constrained in the months ahead. Reforms and government programmes, including the UDAY replacement scheme, will be key to keeping the distribution segment afloat during and after the present crisis.

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