June 2023

The distribution segment has shown a marked improvement in its performance over the last couple of years. The PFC’s latest report, for the financial year 2022, shows that the overall aggregate technical and commercial losses of the discoms fell to 16.4 per cent in 2021-22 from 22.2 per cent in 2020-21. Further, the cash-adjusted gap fell to 39 paise per unit (from 92 paise per unit in the previous year), and aggregate losses decreased by 33 per cent to Rs 310 billion.

These improvements reflect the slew of policy reforms being implemented in the distribution segment, with a strong emphasis on promoting viability and sustainability. The flagship Revamped Distribution Sector Scheme is focusing on enhancing operational efficiency through network strengthening, smart metering and capacity building. It aims to reduce AT&C losses to 15 per cent, and eliminating the ACS-ARR gap by 2024-25.

Apart from this, the late payment surcharge rules have led to a significant im­provement in the payment discipline of discoms. The power ministry has also set a target to eliminate the outstanding dues of discoms to gencos in the next four years.

In a key recent development, the power ministry has notified an amendment to the Electricity (Rights of Consumers) Rules, 2020, introducing time-of-day (ToD) tariffs. The tariff during solar hours will be 10-20 per cent lower than the normal tariff, while the tariff during peak hours will be 10-20 per cent higher. The ToD tariff is an important demand-side management measure, which will facilitate grid management and large-scale renewable energy integration. Besides, it will allow consumers to better manage their electricity bills.

Going forward, a key expected development is the passage of the Electricity Amendment Bill 2022, which includes provisions that allow consumers to choose from multiple sets of service providers, promote sector competitiveness and facilitate privatisation.

Power Line’s Infocus section on “Power Distribution in India” explores in detail the recent trends and developments in the segment as well as the major issues, challenges and the future outlook.