Urgency for Electricity Distribution Reforms in India & GoI Initiatives

Urgency for Electricity Distribution Reforms in India & Government Initiatives

SUDHIR KUMAR SRIVASTAV

Additional General Manager

NTPC LIMITED, NEW DELHI

Sudhirksri1@gmail.com

Abstract -This paper gives an insight of present techno-commercial status of electricity distribution sector in India, its importance in power sector value chain, urgency of electricity distribution reforms in India for financial viability & sustainable growth and government initiative on reforms.

Current Status:

Power Distribution Business is a vital link in Power Sector, as entire collections of energy charges are collected by this business and distributed to entire value chain.  Power Sector cannot be viable without sound Distribution Sector. Present status of Power Distribution in India is as below:

·        Facing enormous problems like:

Ø High Aggregate Technical & Commercial Losses (AT&C Losses).

Ø Non Revision of Tariff in many states.

Ø Free Power Supply for Agriculture Sector.

Ø Cross Subsidy in tariff.

·        AT&C losses are to the tune of 27.15% as on FY 2009-10.

·        Gap between Average cost of supply & Average Revenue Realised per unit of input energy is 145 Paisa i.e. with supply of every KWH there is a loss of 145 Paisa.

·        Accumulated losses are to the tune of 1.9 Lac Crore.

·        Most of the Distribution companies are not able to serve their debt.

·        The losses comprise more than 1.5% of nation’s GDP.

·        Quantum numbers of people don’t have access to electricity.

Urgent Need:

An enabling infrastructure, environment and proper systems to bring about sustainable and pervasive improvements, which requires radical change across the entire distribution business through improved operational processes, leveraging best practices in information technology.

Approach to be adopted:

As electricity is one of the most sensitive basic infrastructure services, condition of electricity distribution services is highly dependent on local conditions, particularly people´s culture.

Every approach for improvement of existing services must be based on the analysis of the local conditions and, therefore, “tailor made” solution is required. There are no “imported solutions” that can be automatically transferred in India.

Required change in existing Management Approach:

·        It is important to avoid the use of the “monopolist excuses” like:

Ø Nobody knows their business better than they do.

Ø There are always external reasons to explain current bad performance.

“A CHANGE IN MANAGEMENT PRACTICES IS NEEDED”

·        To improve management, it is essential to increase TRANSPARENCY across the whole organisation. Reliable corporate information must be available and circulated fluently throughout the company.

Ø Support provided by IT becomes critical.

Ø Management Information Systems (MIS) are essential tools.

·        A “tailor made” approach for improvement of management of DISCOMS requires to actually design and implement a comprehensive ªManagement Improvement Plan (MIP)”.

·        It is essential to define all the Processes and Activities (P&A) to be included in the MIP, the sequence for their execution and existing interrelations, as well as the human, material and financial resources required for proper performance.

·        TRANSPARENCY in availability and use of information related to DISCOM operations is the key for improvement in management

·        MANAGEMENT INFORMATION SYSTEMS (MIS) are the “key tools” that allow to get reliable  information and to handle it transparently

·        COMMERCIAL MIS: supports all the functions related to commercial relation between the utility and its customers. Regular activities of the so called “commercial cycle”: metering, billing and collection (including recovery). Proper execution of these activities is the best way to REDUCE COMMERCIAL LOSSES.

·        Commercial attention of customers (personal at commercial offices, by phone through the call-centre, by Internet, etc.)

Benefits of leveraging Information Technology in Distribution Business:

·        Profitability improvement through:

Ø Revenue enhancement

Ø Cost reduction

Ø Commercial and Technical loss reduction

Ø Reduced cycle time from consumption to collection

·        Enhanced customer satisfaction through:

Ø Improvement in reliability and quality of power supply

Ø Improved handling of customer complaints

·        Other gains -

Ø Operational efficiency through effective decision support.

Ø Flattening of peak demand curve by better load management

In order to achieve above objectives, need for adoption of integrated IT system by utilities was recognized and hence, MoP, GoI launched Restructured APDRP (R-APDRP) in July 2008 as a central sector scheme. Scheme is base on adoption of IT system for verifiable loss level & better administration, followed by regular system strengthening.  The RADRP grant to utilities are purely performance based to increase accountability of utilities towards reform and improvement. Towns and cities with population of more than 30,000 (10,000 in case of special category states) as per census-2001 are covered under R-APDRP scheme.

MoP, GoI is targeting the revival of State distribution utilities through fund infusion under R-APDRP on actual, demonstrable performance in terms of sustained loss reduction. R-APDRP schemes are in two parts:

Part-A: Establishment of transparent & verifiable baseline data through IT intervention, along with GIS, MDAS etc. & SCADA/DMS for large towns.

Part-B: Regular distribution strengthening.

PART- A Main components:

·        Installation of AMR on Distribution Transformers and Feeders.

·        IT for integrating Meter reading, Billing & Collection, Energy accounting & auditing and Management Information System (MIS).

·        GIS Mapping of the entire distribution network & Consumer indexing.

·        Automatic Data Logging / SCADA for big towns.

·        Establishment of IT enabled consumer service centers.

All the major business process of a utility is proposed to be IT enabled on a common integrated hardware and software architecture & approach shall be modular.

Proposed Distribution Business Processes under Integrated IT deployment plan are:

·        Metering, Billing and Collection (MBC)

·        New Connection

·        Disconnection and Dismantling

·        GIS based Consumer Indexing, Asset mapping and Network Analysis

·        Maintenance management

·        Asset Management

·        Customer Care Centre

·        Management Information System

·        Meter Data Acquisition

·        Energy Audit

Benefit from Part-A modules:

·        Better administrative control through accurate MIS.

·        Accurate energy accounting & establishment of Verifiable loss level at each voltage level.

·        Identification of loss pockets for theft control.

·        Better consumer service for consumer satisfaction.

·        Well documented & established business process.

·        Better network management & inventory control.

·        Better resource planning for cost optimisation.

·        SCADA/DMS for more reliable & quality power.

Part-B schemes are provisioned for:

·        Regular distribution network up-gradation.

·        Use of energy efficient Transformers.

·        Use of AB cable & HVDS in theft prone area.

·        Shifting of meters to outside of consumer premise.

·        Replacement of sluggish meters & damaged service connections.

·        Underground cabling for better aesthetic look.

·        Capacitors for PF improvement & loss reduction.

With above works, losses can be reduced by controlling theft, controlling overload, minimizing unbalance, improving Power Factor etc. Also break down will be minimised & reliability of power will improve.

Apart from R-APDRP scheme, GoI has also introduced following program for sustained development of Electricity Distribution Sector:

1.  Rajiv Gandhi Gramin Vidyutikaran Yajna (RGGVY:

·         Rajiv Gandhi Grameen Vidyutikaran Yojana was launched in April-05.

·         Under the programme 90% grant is provided by Govt. of India and 10% as loan by REC to the State Governments.

The RGGVY aims at:

·         Electrifying all villages and habitations as per new definition.

·         Providing access to electricity to all rural households

·         Providing electricity Connection to Below Poverty Line (BPL) families free of charge

Infrastructure under RGGVY :

·         Rural Electricity Distribution Backbone (REDB) with 33/11 KV (or 66/11 KV) sub-station of adequate capacity in blocks where these do not exist.

·         Village Electrification Infrastructure (VEI) with provision of distribution transformer of appropriate capacity in villages/habitations.

·         Decentralized Distributed Generation (DDG) Systems based on conventional & non conventional energy sources where grid supply is not feasible or cost-effective.

Implementation Methodology and conditions under RGGVY :

·         Preparation of District based detailed project reports for execution on turnkey basis.

·         Involvement of central public sector undertakings of power ministry in implementation of some projects.

·         Certification of electrified village by the concerned Gram Panchayat.

·         Deployment of franchisee for the management of rural distribution for better consumer service and reduction in losses.

·         Undertaking by States for supply of electricity with minimum daily supply of 6- 8 hours of electricity in the RGGVY network.

·         Making provision of requisite revenue subsidy by the state.

·         Determination of Bulk Supply Tariff (BST) for franchisee in a manner that ensures commercial viability.

·         Three tier quality monitoring Mechanism for XI Plan Schemes made mandatory.

·         Web based monitoring of progress.

·         Release of funds linked to achievement of pre-determined milestones.

·         Electronic transfer of funds right up to the contractor level.

·         Notification of Rural Electrification Plans by the state governments.

2.  National Electricity Fund:

The Cabinet Committee on Economic Affairs approved setting up of the National Electricity Fund (Interest Subsidy Scheme) to provide interest subsidy etc. aggregating to Rs.8466 crore for a period of 14 years for projects of electricity distribution sector.


The National Electricity Fund (Interest Subsidy Scheme) is being set up to provide interest subsidy on loans to be disbursed to the Distribution Companies (DISCOMS) - both in the public and private sector, to improve the distribution network for areas not covered by Rajiv Gandhi Gramin Vidyutikaran Yojana (RGGVY) and Restructured Accelerated Power Development and Reforms Programme (R-APDRP) project areas, The preconditions for eligibility are linked to certain reform measures taken by the States and the amount of interest subsidy is linked to the progress achieved in reforms linked parameters.

3.     Financial Restructuring of State Distribution Companies :

The Cabinet Committee on Economic Affairs approved the scheme for Financial Restructuring of State Distribution Companies (Discoms). The scheme contains various measures required to be taken by State Discoms and State Governments for achieving the financial turnaround of the Discoms by restructuring their debt with support through a transitional finance mechanism by the Central Government. Support under the scheme will be available for all participating State owned Discoms on fulfilling certain mandatory conditions.

The salient features of the scheme are as follows:

a)     50 percent of the outstanding short term liabilities upto March 31, 2012 to be taken over by State Governments. This shall be first converted into bonds to be issued by Discoms to participating lenders, duly backed by State Governments guarantee.

b)    Takeover of liability by State Governments from Discoms in the next 2-5 years by way of special securities and repayment and interest payment to be done by State Governments till the date of takeover.

c)     Restructuring the balance 50 percent Short Term Loan by rescheduling loans and providing moratorium on principal and the best possible terms for this restructuring to ensure viability of this effort.

d)     The restructuring/reschedulement of loan is to be accompanied by concrete and measurable action by the Discoms/States to improve the operational performance of the distribution utilities.

e)     For monitoring the progress of the turnaround plan, two committees at State and Central levels respectively are proposed to be formed.

f)      Central Government will provide incentive by way of grant equal to the value of the additional energy saved by way of accelerated AT&C loss reduction beyond the loss trajectory specified under RAPDRP and capital reimbursement support of 25 percent of principal repayment by the State Governments on the liability taken over by the State Governments under the scheme.

**************