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The Weakest Link

The Weakest Link

Electricity distribution to the end consumer has been identified as the weakest link in the power value chain. For this sector to turn around, nothing less than a complete makeover is required of various aspects of the distribution matrix.

Major reforms in the distribution sector are required if the country wants to continue in a high-growth trajectory and meet its goal of having electricity for all by 2019, according to a recent World Bank report. Further, India´s annual per capita power sector consumption at around 800 kWh is among the lowest levels in the world. And electricity distribution to end-consumers has been identified as the weakest link in the value chain. So what can be done to improve the scenario?

Says Siddharth Mehta, CEO, India Power Corporation Ltd, ´Power distribution in India needs major reforms if the country has to come back to high growth and meet its goal of 24×7 of electricity for all.

We must free State-owned discoms and regulators from external interference, improve efficiency through effective and faster implementation of various State & Central government schemes and enhance customer satisfaction. The honest consumers are bearing the brunt of the dishonest consumers.´

Mehta lays down a few guidelines that can be followed. ´There must be a distinction between high loss and low loss areas by making a distinction in the hours of supply between them, e.g., the low loss area should be given 24×7 supply and high loss area should be given lesser hours of supply to discourage theft and illegal hooking. This will improve the financial strength of the discom.´

He says that more dedicated police stations are needed for monitoring electricity thefts. He feels that introducing smart metering, LTABC cables and HVDS system & separation of agricultural feeder in rural areas would reduce losses.

According to Amol Kotwal, Director, Energy & Power Systems Practice, Frost & Sullivan (see interview): ´Much of the reforms needed to improve the situation today lie at the State level governments and partly with Central government and financial institutions/regulatory entities.´ Kotwal says that the State distribution utilities need to be run professionally and evaluated at a Central regulatory level for performance on a regular basis. Further, financial institutions/banks/lenders should hold utilities accoun¡table for their debts and push for efficient operations and stop lending to the defaulters.

The government has been trying to roll out initiatives like the R-APDRP (Restructured Accelerated Power Development and Reform Programme), which aims to reduce AT&C losses to 15 per cent in selected urban areas. Among other objectives, this programme plans to support baseline data collection and the adoption of IT applications, and by providing grant funding to renovate, strengthen, and modernise operational, technical, and service delivery mechanisms for distribution. Mehta has some additional suggestions. ´The Shunglu Committee has identified more than 250 towns on the franchisee model and if in the next 6 months at least 50 towns across India with high AT&C loss are given to private players on a competitive basis with timeliness to reduce the losses, one would see the situation further improving,´ he says. Commenting on the programmes rolled out by the government, he adds: ´I would suggest that all Central government schemes such as R-APDRP, RGGVY and Deendayal Upadhyaya Gram Jyoti Yojana/scheme should bemade available through the franchisee by the State/Central government for implementation in their area of operation on similar terms as available to discoms.´

Many industry observers agree that interference from State governments has had a negative impact on the sector. Mehta says: ´While the Electricity Act clearly indicated that the State government will have no role to play in tariff revision, it has generally observed that due to political compulsions the State government has a strong influence on the regulator on the tariff for various categories of the consumers. This effects the performance of the discom as the gap between the average cost of supply and the average cost of realisation keeps increasing.´ Kotwal agrees: ´The utilities must be freed from the control of States which have in the past applied political pressure to keep tariffs lower to play vote-bank politics. The State distribution utilities need to be run professionally and evaluated at a Central regulatory level for performance on a regular basis.´

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