Economy

Smart prepaid meters: A case of misplaced priorities?

Pratim Ranjan Bose February 4 | Updated on February 05, 2020 Published on February 05, 2020

The Budget proposal on smart prepaid metres is not likely to benefit consumers and DISCOMs, say analysts

The Budget proposal to replace all conventional electricity meters by smart prepaid metres in the next three years, has created a huge flutter in the country’s financially weak electricity distribution sector, catering roughly to 21.4 crore (99.99 per cent) households.

At the current price of approximately ₹7,500 a smart prepaid metre, this move would require ₹1,60,500 crore. Assuming the mass procurement will bring down the average cost of a meters to ₹3,000; DISCOMs will still require over ₹64,000 crore in the next three years.

Colossal waste

Raising such huge funds from the market is very difficult for majority of the DISCOMs, which are already financially stressed.

The DISCOMs’ financial woes are impacting the generation segment too.

As in November 2019, the generation sector had outstanding payment dues of ₹81,000 crore from the DISCOMs. States such as Rajasthan, which have undergone debt-restructuring under the UDAY scheme, reported 80 per cent rise in outstanding in 2019 (January to December).

Since the residential segment consumes lesser electricity, this move will neither benefit the consumers nor the DISCOMs.

In West Bengal not more than 15 per cent of the 1.5 crore subscribers consume over 300 units a month. This section along with commercial and industrial users cross subsidise the rest of the 85 per cent residential subscribers.

Finance Minister Nirmala Sitharaman in her Budget said, “The Ministry intends to promote ‘smart’ metering. I urge all the States and Union Territories to replace conventional energy meters by prepaid smart meters in the next 3 years. Also, this would give consumers the freedom to choose the supplier and rate as per their requirements”.

Analysts, DISCOM officials and State electricity regulators feel that the Finance Minister is mixing up issues.

First, there is a case for switching from the conventional meters to regular prepaid at an extra cost of ₹500-1,200 each. This will cost the distribution sector ₹15,000 crore. The manufacturers of smart meters can be nudged to bring down the price.

The exercise will benefit DISCOMs as a large chunk of subscribers pay so little that often it doesn’t cover the cost of distributing and collecting monthly bills. The whole process can be eliminated in the case of pre-paid meters.

Target premium segment

Smart meters is a welcome step in the premium household segment and mostly to the electricity guzzling commercial and industrial sector. This segment pays hefty electricity bills and will be in favour of better meters to save on costs.

Smart meters generate quality data on consumption. Introduction of such meters, particularly in the commercial segment (that includes retail showrooms, malls etc) and industry, will help DISCOMS to understand the demand patterns better.

But what about smart prepaid? Since the DISCOMs are already milking this section for the benefit of vast majority, Can it now be forced to pay in advance?

Choice of supplier

It is not clear, why the Minister took up this issue. Theoretically large industrial consumers already have the option of open access mechanism. In reality, however, most DISCOMs barely allow good customers to migrate and put in place artificial hurdles.

A policy on supply sector franchise is under preparation where the wire will be owned by an agency, probably DISCOMs, and consumers will have the right to chose their suppliers. But this too is not for bulk consumers, who either enjoy cross-subsidy or do not bring any surplus revenue to the DISCOM.

This is because portability of suppliers may come at a cost and a majority of consumers will find it financially unviable.

Published on February 05, 2020
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