The government’s aim to install 25 crore smart meters by 2025 is unlikely to be achieved due to slow progress in implementation, with only up to half of the mandated numbers expected to be installed.

The smart meter installation pace, only around 97 lakh installations till February 29, 2024, has been slow. “While it is likely to gain rapid pace during calendar years (CY) 2024 and 2025, CareEdge Ratings expects the installation to be in the range of 40-50 per cent of the targeted 25 crore smart meters by December 2025,” CareEdge said in a report.

The ratings agency emphasised that policy push and adequate supply chain will be important for quick ramp-up of meter installation.

The smart meter manufacturing capacity in India stands at around 7 crore units per annum and is dominated by a few large players, which are operating at 65-70 per cent capacity utilisation as against the cumulative requirement of 25 crore smart meters, it added.

Semiconductor chips are a critical component of smart meters, and their seamless imports is a precursor to removing any supply bottlenecks to the sector. While the pace of installation is likely to pick up in next two years with an expected ramp-up in sanctions and awarding as well as higher utilisation of smart meter manufacturing capacity, CareEdge said.

CareEdge Ratings Senior Director Sabyasachi Majumdar said that it is clear that smart meters have significant revenue potential for Discoms which have been otherwise bleeding in the past due to inadequate billing.

There is a governmental impetus to drive the rollout quickly through financial support so that the power distribution sector makes a turnaround operationally. However, the implementation pace of the smart metering sector has remained sluggish in the last 1-2 years, he added.

The standard bidding document (SBD) prepared by National Smart Grid Mission (NSGM) for advanced metering infrastructure services provider (AMISP) is adequately structured to safeguard the interest of both the AMISP and Discoms, thereby providing level playing field pan-India.

“The surprises during construction which may have significant impact on the project economics, have not fully emerged. Moreover, once the projects are operational, it will be interesting to observe to what extent is the counterparty credit risk mitigated for the AMISP. While smart metering may not be the panacea for Discoms, it has the potential to cure the operational inefficiencies to a large extent,” Majumdar stressed.

The viability of the smart meter implementation project is closely linked to the average monthly billing to the consumer and prevailing AT&C loss. Thus, there exists the potential for the Discoms to unlock value through smart meter installation in the high AT&C loss area. However, the installation of smart meters for consumers having very low average energy consumption may not yield significant benefits, the agency explained.