The power distribution segment is beginning to show early signs of transformation, particularly in operational performance. As per the latest Power Finance Corporation report on the Performance of Power Utilities, the aggregate technical and commercial (AT&C) losses declined to 15.4 per cent in 2022-23, from 16.2 per cent in 2021-22 and 21.9 per cent in 2020-21. However, state-wise variations in AT&C losses remain high, with discoms in states such as Bihar, Jharkhand, Madhya Pradesh, Odisha and Uttar Pradesh reporting losses of over 20 per cent.
Meanwhile, the financial performance of discoms continues to be an area of concern. The book losses for discoms at an all-India level increased to Rs 572 billion in financial year 2023 from Rs 269 billion in financial year 2022 due to an increase in the power purchase costs, high operating costs and the limited pass-through of these costs through tariffs.
Notably, reform measures in the power distribution segment have intensified under the Rs 3 trillion Revamped Distribution Sector Scheme (RDSS). With the aim of reducing pan-Indian AT&C losses to 12-15 per cent and eliminating the gap between the cost of supply and tariff by 2025, the discoms are undertaking smart metering projects and loss reduction initiatives. However, the scheme is proposed to be extended beyond the earlier envisaged timeline of 2025 as the discoms will need some more time to meet these targets.
The implementation of initiatives under the RDSS, especially smart metering and network modernisation, holds the potential for enhancing sector performance. With smart metering growing at a fast pace, there is a need to implement measures for effective meter data management to ensure lasting outcomes.
Apart from this, some legacy issues in the sector need attention, primarily regarding cost pass-through and tariff revisions. Despite rising costs, the tariff hikes approved by the electricity regulation commission continue to be low. Moreover, there is a need for greater disciple in the timely filing of tariff petitions and subsequent issuance of tariff orders.
Power Line’s InFocus section on Power Distribution explores new and emerging trends, recent developments, major issues and challenges, and the future outlook for the segment.