A robust power distribution system is crucial for achieving the country’s ambitious renewable energy goals and meeting the growing power demand. The operational and financial performance of discoms remains an area of concern although there has been some improvement in recent years. The Power Finance Corporation’s (PFC) Report on the Performance of Power Utilities notes that aggregate technical and commercial (AT&C) losses decreased from 16.23 per cent in 2021-22 to 15.37 per cent in 2022-23.
The government has implemented various policies to enhance the power distribution segment’s performance. A key initiative is the Revamped Distribution Sector Scheme (RDSS), with a budget of Rs 3 trillion, aimed at improving the operational efficiency and financial viability of discoms through result-oriented financial assistance. Additionally, significant policy and regulatory initiatives have been taken, including the Electricity Rights of Consumers Rules, the implementation of green tariffs and the development of electricity markets. These efforts aim to bring discipline into the sector, improve the tariff structure and empower consumers.
Size and growth
The distribution network has been growing steadily, in terms of line length and transformer capacity. As per the Central Electricity Authority (CEA), the total number of power substations (66/11 kV, 33/11 kV and 22/11 kV) in the country was 39,965, with a total installed capacity of 482,810 MVA as of March 31, 2022. The total number of feeders (66 kV/33 kV/22 kV) stood at 36,804 in March 2022 and the length of the feeder infrastructure was 589,304 ckt km. The country had 230,979 feeders at the 11 kV level with a combined length of 4,935,279 ckt km. It had 1.47 million distribution transformers, with a combined capacity of 6.89 million MVA during the same period. The low tension power grid comprised 2,231,495 km of single-phase lines and 5,714,263 km of three-phase lines.
As per NITI Aayog, the total energy sales in 2022-23 were 1,117.9 BUs in 2022-23. Of the total, the domestic category consumers accounted for the maximum share at around 32 per cent at 355.8 BUs (over 331.6 BUs in 2021-22), followed by industrial consumers at 30.4 per cent at 340.2 BUs (compared to 330.26 BUs in 2021-22).
In 2023-24, the energy supply exhibited a clear uptrend, growing strongly. The energy requirement was 1,626 BUs, 8 per cent higher year on year over that in the previous year. Peak demand also grew strongly at more than 12 per cent year on year, with all-India peak demand (243 GW) at more than peak supply (240 GW) in 2023-24. From April 2023 to March 2024, around 4 BUs of energy was not supplied as per the requirement. During the same period, around 3 GW of all-India peak demand was not met.
Operational and financial performance
As per PFC’s Report on the Performance of Power Utilities, the aggregate losses of distribution utilities increased from Rs 269.47 billion in 2021-22 to Rs 572.23 billion in 2022-23.
Receivables from power sales improved from 138 days of sale as of March 31, 2022 to 119 days as of March 31, 2023. Further, payables for the purchase of power improved from 168 days of sale as of March 31, 2022 to 128 days as of March 31, 2023.
The total outstanding debt by distribution utilities increased from Rs 6,148.53 billion as of March 31, 2022 to Rs 6,843.79 billion as of March 31, 2023. With regard to outstanding discom dues, as per the PRAAPTI portal, accessed on June 12, 2024, the total dues of discoms to gencos comprised balance legacy dues of Rs 289.7 billion and current dues of Rs 632.65 billion.
On the operational performance front, AT&C losses fell to 15.37 per cent in 2022-23, almost 6 per cent lower than 2018-19 levels. This was driven by an improvement in collection efficiency, from 92.77 per cent in 2020-21 to 97.27 per cent in 2022-23. Meanwhile, billing efficiency improved from 86.13 per cent in 2021-22 to 87 per cent in 2022-23.
As per the 12th Annual Integrated Rating and Ranking of Power Distribution Utilities report, the financial deficit in the power distribution sector widened to Rs 790 billion in FY 2023, primarily driven by an 8 per cent increase in the gross input energy and a substantial rise in power purchase costs during the year. The absolute cash gap also increased from Rs 440 billion in FY 2022 to over Rs 790 billion in FY 2023, driven by the increasing average cost of supply (ACS) average realisable revenue (ARR) gap.
Key developments
Electricity (Late Payment Surcharge and Related Matters) (Amendment) Rules, 2024: In February 2024, the MoP notified the Electricity (Late Payment Surcharge and Related Matters) (Amendment) Rules, 2024. The amendments allow long-term power generators to sell power in the short-term market, allowing power generators to explore additional avenues for selling their generated power beyond their long-term contracts. Power generators who do not offer their surplus power will now not be eligible to claim capacity or fixed charges corresponding to that surplus quantum. Additionally, the surplus power cannot be offered for sale in the power exchange, at a price of more than 120 per cent of energy charge plus applicable transmission charge.
Electricity (Second Amendment) Rules, 2024: In January 2024, the MoP incorporated provisions for subsidy accounting and payment and the framework for financial sustainability. As per these amendments, discoms are now required to provide quarterly reports with detailed information about subsidy payments. The amendment also introduces procedures for allowing the transfer of expenses incurred by distribution licensees for the creation and upkeep of distribution assets.
Amendment to Electricity (Rights of Consumers) Rules: In February 2024, the Ministry of Power (MoP) notified the Electricity (Rights of Consumers) Amendment Rules, 2024, reducing the timeline for getting new electricity connections and simplifying the process of setting up rooftop solar installations. Exemption has been given for the requirement of technical feasibility study, for systems up to a capacity of 10 kW. For systems of capacity higher than 10 kW, the timeline for completing the feasibility study has been reduced from 20 days to 15 days.
Smart metering update
As of June 2024, 11.6 million smart consumer meters have been installed in the country. Notably, during 2023-24, 4.84 million smart consumer meters have been installed, nearly doubling the installations from the previous year. With the government mandating the transition to a complete smart metering system, replacing all the existing 250 million meters by 2025, the pace of smart meter awards and installations is expected to accelerate in the coming months. Bihar leads with the highest installation of smart meters, totalling 3,235,830, followed by Assam with 2,147,283 installed. Uttar Pradesh closely trails with 1,186,953 meters installed, while Madhya Pradesh and Haryana have installed 971,151 and 847,467 meters respectively.
Update on RDSS
The reforms-based and results-linked RDSS has an outlay of Rs 3,037.58 billion over five years (2021-22 to 2025-26), with an estimated government budgetary support of Rs 976.31 billion. The scheme aims to reduce AT&C losses on a pan-Indian level to 12-15 per cent by 2024-25; reduce the average cost of supply-average revenue realised gap on a pan-Indian level to zero by 2024-25; and improve the quality, reliability and affordability of power supply to end-consumers. The RDSS focuses on providing financial support for smart metering systems, distribution infrastructure upgrades, training, capacity building, and other enabling and supporting activities. Within the framework of the RDSS, there is a provision to extend financial support to eligible discoms for the deployment of prepaid smart meters for 250 million consumers, as well as system metering with communication features, by March 2025.
According to the Rajya Sabha Report (December 2023), around Rs 1,217 billion has been sanctioned (aggregate value of detailed project reports approved) for loss reduction works and Rs 1,304 billion for smart metering works. The overall physical progress for loss reduction works under RDSS is currently at 9.64 per cent (as per the RDSS dashboard accessed on June 5, 2024).
Future outlook
The CEA, in collaboration with distribution utilities, has formulated the Distribution Perspective Plan up to fiscal year 2029-30. According to the 20th Electric Power Survey, the peak electricity demand of the country is projected to rise to 334,811 MW by 2029-30, demonstrating a CAGR of 6.45 per cent from 2021-22 to 2029-30.
The total power substation capacity (66/11 kV, 33/11 kV and 22/11 kV) in the country is expected to increase to 624,332 MVA by 2029-30. During 2022-23 to 2029-30, it is envisaged that another 12,192 substations will be added with a total capacity of 141,522 MVA.
The plan aims to add 92,920 new 11 kV feeders with a total length of 968,503 ckt km between 2022-23 and 2029-30. This will bring the total number of 11 kV feeders to around 323,899 and increase the overall network length to approximately 5,903,782 ckt km.
An addition of 46.5 million new distribution transformers (DTs) has been planned between 2022-23 and 2029-30. This represents a substantial increase in DT capacity, bringing the total to 9.28 million MVA by the end of the decade.
Based on the details received from utilities, about Rs 4.28 trillion will be required for the upgradation of the distribution infrastructure during 2022-27, of which about Rs 1.89 trillion will be available to discoms, including funds sanctioned under the RDSS. The available funds will constitute around 44 per cent of the total investment required up to 2027. About Rs 2.86 trillion will be required for the upgradation of the distribution infrastructure during 2027-30, taking the total investment required to Rs 7.42 trillion during 2022-30.
Going forward, there are ambitious plans to build a robust distribution network.
With peak demand projected to rise, the draft distribution plan outlines infrastructure expansion strategies to ensure sufficient capacity, with a strong emphasis on renewable energy sources.
