Encouraging Growth

Update on government schemes in the sector

The power sector, especially the transmission and distribution segments, has been one of the key focus areas of the current government. The government has embarked upon a massive programme to provide uninterrupted power supply across the country. Several steps have been taken for increasing generation, strengthening transmission and distribution networks, segregating feeders and providing metered power to consumers. Some of these initiatives are the Ujwal Discom Assurance Yojana (UDAY), the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY), the Integrated Power Development Scheme (IPDS), Power for All (PFA), Unnat Jyoti by Affordable LEDs [light-emitting diodes] for All (UJALA) and the National Smart Grid Mission (NSGM).

Indian Infrastructure takes a look at the achievements so far and the current status of these initiatives…

UDAY

UDAY was launched by the central government in November, 2015 to facilitate the revival of discoms which have been struggling with losses and mounting debt. Within six months of the announcement of the scheme, 18 states and one union territory (Puducherry) have agreed in principle to participate in it, covering over 90 per cent of the total discom debt; and 10 states have already signed memorandums of understanding (MoU)  with the Ministry of Power (MoP) for implementation of the scheme. These states – Jharkhand, Chhattisgarh, Rajasthan, Uttar Pradesh, Gujarat, Bihar, Punjab, Haryana, Jammu & Kashmir, and Uttarakhand – account for over Rs 1.98 trillion of combined debt, which is approximately 46 per cent of the total debt on the books of distribution utilities, as of September 30, 2015.

While the scheme is optional, it provides discoms that opt for it with the opportunity to break even in the next two-three years through reduction in their interest burden, cost of power and power losses in the segment, and improvement in their operational efficiency.

According to the MoP, the scheme is ex-pected to eventually lead to annual savings of Rs 1.8 trillion. Under UDAY, state governments will take over 75 per cent of the total outstanding debt of discoms and pay back lenders by issuing bonds. This is likely to reduce the discoms’ interest burden to 8-9 per cent from the current levels that are as high as 14-15 per cent. Apart from the annual savings in interest cost on account of debt restructuring, discoms will also benefit from an improvement in their credit ratings due to the resulting financial and operational efficiencies. This will help them raise cheaper funds for future capital investments. Other benefits include savings through reduction in aggregate technical and commercial (AT&C) losses, improvement in energy efficiency, etc.

During 2015-16, eight states – Rajasthan, Uttar Pradesh, Haryana, Punjab, Jammu & Kashmir, Bihar, Jharkhand and Chhattisgarh – issued bonds worth Rs.989.59 billion. Rajasthan issued bonds of the highest value at around Rs 373 billion, followed by Uttar Pradesh (Rs 243 billion) and Haryana (Rs 173 billion).

DDUGJY

DDUGJY was announced by the government in December 2014 with some modifications to the already existing Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). Apart from the electrification of unelectrified villages and households, the scheme also aims at segregation of feeders, and strengthening and augmenting sub-transmission and distribution infrastructure in rural areas, including metering of distribution transformers (DTs), feeders and consumers.

The proposed works under the scheme include construction or segregation of 16,500 feeders, laying of 21,900 ckt. km of 33 kV and 66 kV lines, setting up of 1,620 new substations, augmentation of 1,615 existing substations, metering of feeders, DTs and consumers, and other low tension infrastructure works.

As of April 2016, 586,675 villages (approximately 98 per cent of the total inhabited villages) have been electrified. However, in terms of households, more than 30 per cent of the total rural households are still without electricity. Nine states – Andhra Pradesh, Goa, Gujarat, Haryana, Kerala, Maharashtra, Punjab, Sikkim and Tamil Nadu – have achieved 100 per cent village electrification. Of these, only Goa, Gujarat and Punjab have achieved electrification of all households.

During 2015-16, 7,108 villages were electrified under the scheme, surpassing the target of 7,000 villages. The remaining 11,344 villages are now targeted to be electrified by December 2016. Of these, 8,243 villages are planned to be electrified through the grid, 2,621 villages through off-grid systems and 480 villages under various state plans. Till April 2016, 441 villages had been electrified. While projects for all the unelectrified villages have been sanctioned, 4,737 projects are yet to be awarded.

IPDS

Subsuming the Restructured Accelerated Power Development and Reforms Programme (R-APDRP), the IPDS was launched in November 2014 with the aim of reducing AT&C losses and providing quality power by strengthening subtransmission and distribution networks, including metering at all levels, in urban areas. All discoms are eligible for financial assistance under this scheme. The total outlay for the scheme has been estimated to be around Rs 326 billion, including budgetary support of Rs. 253.5 billion from the central government during the entire implementation period. In addition, the funds earlier approved for the R-APDRP are also being utilised under this scheme.

As of April 2016, IPDS sanctions have been made for 3,486 towns across 25 states. The projects aggregate an approved project cost of Rs 248.38 billion. This includes an approved government grant of Rs 145.53 billion, of which Rs 3.26 billion has already been released.

Under Part A of the scheme (information technology [IT] and supervisory control and data acquisition [SCADA] projects), of the 1,405 towns sanctioned for IT applications, 1,222 have achieved “go-live” status and 35 control centres have been commissioned as part of the 72 SCADA projects. Under Part B of the scheme (related to strengthening of the distribution network), projects have been awarded for 1,217 towns and work has already been completed in 425 towns.

UJALA

UJALA is the new name given to the ongoing LED-based domestic efficient lighting programme which is being implemented by Energy Efficiency Services Limited (EESL). The national LED programme was launched in January 2015 with a target of replacing 770 million incandescent bulbs with LED bulbs.

In the last quarter of 2014-15, the total number of LED bulbs distributed was 3 million. This number increased to 90 million in 2015-16 and as of April 2016, over 100 million LED bulbs have been distributed under the scheme by the government. UJALA is running successfully across 13 states and 120 cities in the country.

The distribution of LED bulbs is leading to savings of over 30.7 MUs of energy and about Rs 147 million in costs per day. This has also helped the country avoid capacity of about 2,600 MW. The country is also benefiting from the reduction of about 29,750 tonnes of CO2 emissions per day.

The UJALA scheme has also played a significant role in creating awareness about energy-efficient lighting which has led to the contribution of about 60 million LED bulbs by industry, apart from those distributed by the government.

PFA

The PFA aims to provide 24×7 reliable power supply to all consumers by 2018-19. Under the programme, comprehensive state-specific action plans for 24×7 power are being prepared by the MoP jointly with the states. As of April 2016, the MoP had released action plans for 21 states – Andhra Pradesh, Assam, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Meghalaya, Nagaland, Odisha, Punjab, Rajasthan, Sikkim, Telangana and Uttarakhand. Having already prepared the PFA roadmaps, the states are now starting to work towards the achievement of targets as per the roadmaps. All other schemes, including DDUGJY and UDAY, are likely to support this programme and help in the achievement of its objectives.

NSGM

The central government approved the NSGM in May 2015. The NSGM will drive the planning, monitoring and implementation of policies and programmes related to all smart grid activities. The major activities envisaged under the mission include development of smart grids (implementation of technologies in the fields of automation, communication, IT systems, etc.), development of microgrids, consumer engagement, as well as training and capacity building.

The total outlay for NSGM activities for the Twelfth Plan is Rs 9.8 billion with a budgetary support of Rs 3.38 billion. Two smart grid projects for Amravati and Chandigarh have been approved under the NSGM at a cost of Rs 1,186 million with 30 per cent funding from the NSGM.

Apart from these, the government is also implementing eleven smart grid pilot projects in different states including Assam, Haryana, Himachal Pradesh, Karnataka, Punjab, Telangana, Tripura, West Bengal, Gujarat, Kerala and Puducherry. Of these, two projects – in Kerala and Puducherry – are yet to be awarded.

In addition to the NSGM, similar state-level missions are also planned to be established for streamlining state-level smart grid activities.

Conclusion

While these schemes have already led to improvements in the power sector scenario in the country, there is still huge scope for further improvement, as schemes like the PFA, UDAY and the NSGM are yet to be fully implemented. Also, since the objectives of some of these schemes overlap with each other, better achievement of results is likely with coordinated implementation. This, along with other initiatives like (capacity addition and amendments in key policies and legislations like the Electricity Act and National Tariff Policy), is likely to help the power sector immensely. However, implementation of the schemes as planned will be a key factor in determining their success over time.

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