Even as the industry expects a growth-oriented budget focusing on asset creation in the power sector for FY24, many are of the view that enhanced focus is required on distribution, the sector’s Achilles heel.
Analysts and market players point out that majority of policies are largely one sided, which is capacity building of the energy value chain. However, the distribution sector, despite schemes such as the Revamped Distribution Sector Scheme (RDSS), needs enhanced focus.
Managing Director and CEO of Hitachi Energy India, N Venu aptly sums up the scenario in the sector. He noted that government is moving in the right direction setting a conducive environment that will propel India to a carbon-neutral future.
“We also need to look at optimising utilisation of existing generation capacities, increased grid flexibility and better planning and forecasting of electricity demand across sectors. Government should also support transmission and distribution through introduction of PLI schemes for high-voltage direct current products, subsea cables and offshore transmission equipment,” he suggested.
Sterlite Power MD Pratik Agarwal also emphasised on additional focus on distribution adding that government should be commended for RDSS, which addresses some of the long standing financial and operational issues faced by Discoms.
“However, while the scheme has immense potential, it would require a coordinated and comprehensive approach involving multiple stakeholders including central and state governments, Discoms, regulators, and consumers. Implementation, therefore, holds the key to its success,” he added.
Gaps in RDSS
Nangia Andersen Partner (Power Advisory) Arindam Ghosh points out that RDSS was announced in FY21 and today is ending with not much headway. In RDSS, under infrastructure development, there are 7-8 conditions. Now it is going as a loan to a state and it will only become a grant once Discoms agree to these conditions.
“One of the conditions is that you should have zero arrears from government customers. The root cause is that these arrears do not get reflected in state government budgets. So if power bill is included in the budget, whenever the utility gives the bill, it will get paid. We need to ensure that these arrears get included in budgets,” he said.
Discoms are not being given enough support. In this case, the RDSS is not meeting the intended targets. It needs to be streamlined, in the sense, how money should be flowing from the centre to Discoms. A re-visit is needed, Ghosh stressed.
Venu said that despite several schemes there is a huge mismatch between the cost of buying power from generating sources and tariff charged to consumers. Any upward revision in tariff is a discussion affecting multiple stakeholders.
“To further ensure success, the government could focus on suitable funding schemes. A time-bound performance-based scheme to improve the distribution sector by modernising networks and digitalising networks with a clear focus on utility performance and consumer focus could be game-changing in bringing accountability and encouraging Discoms to adhere to committed targets and become financially viable,” he added.
On grid integration, Ghosh stressed Discoms need to enhance their network capacity.
“A problem that Gujarat is facing. They have many rooftop solar units and because of that the system voltage has increased (distribution line voltage). So, transformer failures are happening. It’s quite unheard of as normally, in India, low voltage is a problem. This is due to high penetration of rooftop solar. So we need to address such issues of integration,” he added.