Economy

₹3-lakh cr Discom package to focus on smart metering, offer 60% grants for other reforms

Kuwar Singh New Delhi | Updated on March 28, 2021

Smart metering will be the top priority under the ₹3-lakh crore financial package announced in the Budget last month for the country’s terminally-ill electricity distribution companies.

“We have prepared the draft guidelines of the programme. The top priority will be smart metering, which the Centre will support fully under an OPEX model,” a senior official told BusinessLine.

OPEX model

The OPEX (operating expenditure) model is already on display in Bihar, where central public sector company Energy Efficiency Services Ltd is installing smart meters using a build-own-operate-transfer mechanism. The upfront investment cost is borne by the firm, and the State Discoms will pay it back gradually as their commercial losses decrease on the back of improved billing efficiency.

The second priority will be on reduction of technical losses. “Low-tension lines run for about 20-25 km and have a lot of technical losses. The feeder will be bifurcated, so that there will be two feeders for 12 km each,” the official said. The third priority would be on system strengthening such as building new substations.

“The Centre will fund these two components with a 60 per cent grant. Discoms can determine to fund the remaining 40 per cent through loans or another source of their preference,” the official said.

Run by State governments, most Discoms have been caught in a cycle of huge debt and a loss-making business model as they are not allowed by state regulators to charge tariffs that would allow them to break even. While it will address technical and commercial losses (AT&C losses) directly, the new performance-linked financial package aims to reduce the gap between average revenue realisation and average cost of supply (ARR-ACS gap) by linking the disbursal of funds on the condition that state governments must fortify their Discoms’ balance sheets.

Five-year package

Under the five-year package, the grants will be released every year only if State governments maintain the basic financial commitment of paying the promised subsidy and government dues, filing annual tariff petitions, and creating no regulatory assets, the official said. “Any year that Discoms have not met those conditions, the grant will not be released.”

“So far, loans of ₹1,35,497 crore have been sanctioned and ₹46,321 crore released to States/Discoms,” Minister of State (Independent Charge) for Power RK Singh had told Parliament last week. The gap between the sanctioned and disbursed amounts is a result of the Discoms failing to meet the conditions of the first tranche of payments, the official said.

Published on March 28, 2021

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