The Power Ministry’s target to replace 25 crore conventional meters with smart meters by 2025, a critical component of the Revamped Distribution Sector Scheme (RDSS), is unlikely to be met, ratings agency ICRA said.

However, it anticipates that the awarding of smart meters by the State distribution utilities (Discoms) to increase to 22.2 crore over the near to medium term from around 9.9 crore so far.

“Of the 222 million meters sanctioned as of December 2023, 99 million meters have been awarded. However, the progress in installations remains low, with only 8 million smart meters installed as of December 2023. Given the current pace of installations, the GoI’s target to replace 250 million conventional meters with smart meters by 2025 is unlikely to be met,” ICRA VP and Co-Group Head (Corporate Ratings) Vikram V said.

Pace of installation to accelerate

Nonetheless, ICRA expects the pace of installations to witness a significant jump over the next two years. Moreover, the tendering activity would remain high in the near to medium term, considering the pending award of the balance 12.3 crore meters, providing order book visibility for advanced metering infrastructure service providers (AMISPs) and meter manufacturers, he added.

The rating agency pointed out that with expected scale-up in tendering activity, a commensurate increase in domestic meter manufacturing capacity and the availability of system integrators for the head-end systems (HES) and meter data management systems (MDM) remain important.

The replacement of conventional meters with smart meters is a key initiative of the RDSS, which was launched in July 2021, to bring down AT&C (aggregate technical & commercial) losses and reduce the gap between the cost of supply and tariff to zero for the Discoms.


The viability for the winning bidders remains largely linked with the capital cost of setting up the smart meters along with the associated communication and IT infrastructure. For an advanced metering infrastructure service provider (AMISP) with a quoted service charge of ₹70-75 per meter per month, the capital cost should remain at or below ₹5,000 per meter to achieve a reasonable debt service coverage ratio (DSCR) of 1.2x, Vikram explained.

Further, the availability of a direct debit payment mechanism, wherein online payments received from the consumers are to be routed from the payment gateway to the AMISP, is likely to mitigate the counterparty credit risk associated with the Discoms to a large extent. However, the track record of this mechanism remains to be seen,” he added.

The RDSS scheme has adopted the design, build, finance, own, operate, and transfer (DBFOOT) model for the installation of smart meters, wherein AMISP will be contracted for financing, supplying, installing, and operating the meters along with the associated communication and IT infrastructure.