Strengthening Discoms

Progress under key government programmes

Over the past few years, several schemes have been launched by the central government for improving the financial and operational health of discoms. Key among these was the Ujwal Discom Assurance Yojana (UDAY), launched in 2015 to improve the financial and operational efficiency of state discoms, which came to an end in March 2020. The government also introduced schemes for urban and rural distribution system strengthening under the Integrated Power Development Scheme (IPDS) and the Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY). The latter was subsumed under the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) under which nearly 100 per cent household electrification was achieved.

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


Under UDAY, 27 states and five union territories signed MoUs with the Ministry of Power (MoP). Of these, 16 states signed comprehensive MoUs and 11 states and five union territories (UTs) signed MoUs for only operational improvement. Under the scheme, 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 16 UDAY states and UTs that signed comprehensive MoUs with the government 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 states.

UDAY had primarily two outcome parameters – one is aggregate technical and commercial (AT&C) loss reduction to 15 per cent and the other is reduction in the gap between the average cost of supply (ACS) and the average revenue realised (ARR) to zero by March 2019. Due to implementation challenges in some states, as well as their late joining, some states were allowed an extension to complete the turnaround process of their discoms by one to two years. As per the Power Finance Corporation’s (PFC) report on the performance of state power utilities (2018-19), AT&C losses have been declining consistently, coming down from 23.96 per cent in 2015-16 to 22.03 per cent in 2018-19. During 2019-20, India Infrastructure Research estimated AT&C losses (based on the average of AT&C losses across 36 discoms) to be around 20.46 per cent. However, this is higher than the targeted loss reduction level of 15 per cent, which was to be achieved by March 2019. Moreover, results have been highly variable across states. Meanwhile, the gap between the ACS and ARR for distribution utilities increased to reach Re 0.52 per kWh in 2018-19 from Re 0.30 per kWh in 2017-18. UDAY states showed an improvement in annual book losses from Rs 515.62 billion in 2015-16, to Rs 378.77 billion in 2016-17 and 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 66 per cent and 90 per cent distribution transformer metering has been achieved in rural and urban areas respectively, as of April 2021. On the smart metering front, progress has been rather slow, with 7 per cent smart metering achieved for consumers with per month consumption of above 500 kWh, while for consumers with per month consumption of over 200 kWh and below 500 kWh, 8 per cent progress has been achieved so far.


Launched in 2014, the IPDS aims at providing quality and reliable 24×7 power supply in urban areas. The scheme is designed to aid AT&C loss reduction, establish IT-enabled energy accounting/auditing, improve billed energy based on metered consumption and improve collection efficiency. The programme, excluding the Restructured Accelerated Power Development and Reforms Programme (R-APDRP) component, has an estimated outlay of Rs 326.12 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.

In terms of physical progress, over 33,000 ckt. km of overhead lines have been installed as of November 2020 and around 75,000 ckt. km of underground/ aerial bunched cables have been laid. Further, 927 new substations have been set up while over 1,500 existing substations have undergone capacity augmentation. As of November 2020, all smaller towns have been IT enabled under the IPDS in Andhra Pradesh (east), Telangana and Uttarakhand for improved consumer services. In addition, for better workflow management in utilities, the IPDS has also funded enterprise resource planning (ERP) across several utilities, of which implementation has been completed in 11 utilities. Further, 98 gas-insulated switchgear (GIS) substations are under progress in various states. Under the older projects subsumed under the IPDS, all 1,290 towns have been IT enabled and SCADA systems have been completed in 57 towns. System strengthening works have also been completed in 1,197 towns.

As of April 2020, a total of Rs 313.14 billion has been sanctioned under the scheme. This includes a government grant of Rs 196.38 billion, of which Rs 153.36 billion has been released. Of the total sanctioned outlay, Rs 284.81 billion is for system strengthening of the sub-transmission and distribution network, Rs 7.56 billion for IT enablement of 1,651 towns, Rs 6.31 billion for ERP to improve the workflow performance in discoms, Rs 3.86 billion for smart metering and the remaining is for substation monitoring and installation of GIS substations. For the real-time data acquisition system, which functions like a mini SCADA system to improve the feeder-level performance, Rs 1.53 billion has been sanctioned.


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 the 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 (GoI). The grant disbursed under Saubhagya was Rs 27.09 billion in 2018-19. In 2019-20 (up to November 30, 2020), Rs 62,202 million was released as GoI grant for the implementation of Saubhagya. Further, no fund allocation was made for the Saubhagya scheme during 2020-21.

As of March 31, 2019, all states declared 100 per cent household electrification, except 18,734 households in left-wing extremist (LWE)-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, but were later willing, to get electricity connections. Except for 1,855 households in Chhattisgarh and 25,429 households in Jharkhand located in LWE areas, all houses have been reported electrified as of February 2021. During the same time, a total of 28.1 million households have been electrified since the launch of the Saubhagya scheme. These seven states have reported the electrification of 1.39 million unelectrified households during 2019-20.


Launched along with the IPDS in December 2014, the DDUGJY targets electrification of all villages and strengthening of the sub-transmission and distribution infrastructure in rural areas. Projects worth Rs 444.16 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 494.57 billion (up to November 30, 2019) since 2014-15. An amount of Rs 93.2 billion was released as GoI grant during 2020-21.

In terms of physical infrastructure, as of November 2020, significant progress has been made under the scheme in village electrification. Feeder separation, involving 122,049 ckt. km of 11 kV lines, has been completed. Achievements under the system strengthening component include the establishment/augmentation of 3,896 new substations, installation of 575,115 distribution transformers and installation of 491,338 km low tension and 203,085 km high tension 11 kV and 33 kV lines. Besides, metering of 14.8 million consumers, 208,924 distribution transformers and 13,190 feeders has been completed.


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 and eight projects have achieved financial closure. Assam, Tripura and Telangana projects are expected to achieve financial closure soon. Some of the key findings from these projects are: six pilots exceeded their AT&C loss targets; smart grid systems have been integrated with the R-APDRP in Tripura, Assam and West Bengal pilots; and remote connect/disconnect has been tested at all pilots. In the Uttar Haryana Bijli Vitran Nigam pilot, meters with more than one communication module were developed/ tested/ deployed for fail-safe communication. 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. Further, 19 state-level PMUs have been set up under the NSGM.


Significant progress has been made under various government schemes, but a lot still remains to be done. 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 will be key to keep the distribution segment afloat during and after the present crisis. n

Akanksha Chandrakar


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