The government introduced the Revamped Distribution Sector Scheme (RDSS) to enhance the operational efficiency and financial sustainability of discoms. With a sizeable outlay of Rs 3,037.58 billion over five years (2021-22 to 2025-26), including an estimated government budgetary support of Rs 976.31 billion, the scheme aims to provide result-linked financial assistance to discoms based on specific pre-qualifying criteria and performance benchmarks. The RDSS is focused on three main objectives: reducing aggregate technical and commercial (AT&C) losses to 12-15 per cent by 2024-25, eliminating the gap between the average cost of supply (ACS) and average revenue realised (ARR) by 2024-25, and improving the quality, reliability and affordability of power supply through a financially sustainable and operationally efficient distribution sector.
Scheme details
The scheme comprises two parts: Part A, which provides financial support for prepaid smart metering, system metering and distribution infrastructure upgrades, and Part B, which covers training, capacity building and other supporting activities. The goal of the RDSS is to install prepaid smart meters for approximately 250 million consumers, excluding agricultural users.
For prepaid smart metering, the following grants will be provided: Rs 1,350 or 22.5 per cent of the meter cost per consumer, whichever is lower, for special category states, and Rs 900 or 15 per cent of the meter cost per consumer, whichever is lower, for other states. For works other than smart metering, the maximum financial assistance for discoms will be 90 per cent for special category states and 60 per cent of the approved cost for other states.
Smart meters will be deployed through public-private partnerships under a totex model. This approach aims to enforce service-level agreements for accurate energy accounting, enabling better detection of defaulting consumers and instances of meter tampering. Under totex, it is anticipated that discoms can cover monthly expenses with increased revenue from improved billing and collection via prepaid metering.
Funds sanctioned/disbursed
Around Rs 1,217 billion has been sanctioned (aggregate value of DPRs approved) for loss reduction works, and Rs 1,304 billion for smart metering works. The funds are being released based on the progress of works post tendering on part of utilities, subject to meeting pre-qualification criteria.
REC Limited and PFC Limited have been designated as the nodal agencies under the scheme. REC Limited has been allocated 19 states and UTs under the RDSS, covering 32 discoms, while PFC has been allotted 14 states with a total of 24 discoms. As of December 2023, PFC has disbursed a cumulative Rs 535.87 billion under RDSS to discoms. As per REC, an amount of Rs 588.69 billion has been released to discoms as of December 2023.
Loss reduction
The overall physical progress for loss reduction works is currently at 9.64 per cent (as per the RDSS dashboard, accessed in June, 2024). The average AT&C losses of distribution utilities in the country decreased from 16.23 per cent in 2021-22 to 15.37 in 2022-23. The ACS-ARR gap also significantly decreased from Rs 0.69 per kWh in 2020-21 to Rs 0.45 per kWh in 2022-23. Timely payments of subsidies and government department dues by state governments have contributed to the increased revenue. Regulatory discipline has shown a significant improvement as well.
Smart metering progress
Around 222 million smart consumer meters, 5.26 million DT meters and 0.18 million feeder meters have been sanctioned across the onboarded states. As of June 2024, over 116 million consumer smart meters have been awarded, accounting for 52 per cent of the total sanctioned meters, and about 11 million consumer smart meters have been installed, as per the NSGM dashboard. Further, 4 million DT meters (76 per cent of the sanctioned amount) and 122,575 feeder smart meters (67 per cent of the sanctioned amount) have been awarded.
The states with the highest number of sanctioned consumer smart meters are Uttar Pradesh, Tamil Nadu, Maharashtra, West Bengal and Bihar. Uttar Pradesh and Tamil Nadu together account for more than 25 per cent of the total sanctioned smart meters.
Outlook and challenges
The complexities of integrating utility IT systems and meter data management systems are causing delays and increased costs. Some states have introduced additional conditions in tenders, impacting the bidding process. Additionally, there were supply issues with smart meters for several months. The simultaneous tendering of a large volume of works has led to cost escalations. Differences in tendering practices across states have also created inconsistencies. Furthermore, inadequate training and capacity-building are hindering the ability of officials to derive meaningful insights from data and translate them into actionable decisions.
To address these challenges, standard bidding documents for smart meter works, enterprise resource planning and billing works have been introduced to ensure uniformity. The Ministry of Power has also issued standard operating procedures for the roll-out of prepaid consumer meters under the RDSS, to facilitate efficient and rapid deployment. According to these procedures, discoms must ensure that all consumer meters compliant with relevant IS standards operate in pre-payment mode after installation.
The CEA’s draft Distribution Perspective Plan 2030 provides an overview of infrastructure additions and approvals under the RDSS for the period 2022-25. The CEA has planned 5,462 new substations (66/33/22 kV), with 409 (7 per cent) approved under the RDSS. HT feeders will see an addition of 505,681 ckt km, with 273,581 ckt km (54 per cent) approved. For distribution transformers (11/0.433 kV), 1,788,309 units are to be added, with 459,718 units (26 per cent) approved, and their capacity will increase by 84,478 MVA, of which 26,609 MVA (31 per cent) has been approved. Additionally, 669,630 ckt km of LT feeders will be added, with 5,446,195 ckt km (81 per cent) approved.
Overall, the ongoing initiatives under the RDSS are promising for the power distribution segment, and have the potential to transform the sector in the future.
Aastha Sharma