Indian Power Distribution Sector: challenges and opportunities.

The financial health of power distribution companies (discoms) is a major worry for the whole country.
Going by Shunglu  committee report estimates, discoms incurred a staggering loss of Rs 82,000 crore last 5 years,estimating that the losses of discoms have been rising over the years and will keep on increasing unless some stringent and disciplined policies are followed by the discoms.

At the recently concluded India Energy Congress held in New Delhi by the World Energy Council, the problems of the power distribution companies (discoms) were discussed by eminent personalities in the sector.

At present there is a combined consumer base of 200 million people  in the country distribution segment altogether.With 400GW approx load, 73 Distribution Utilites, 17 private companies, 40 corporate discoms, and  3 SEBs.

As per report of the high-level Shunglu panel, net loss of 15 discoms — which account for over 90 per cent of country’s power consumption — after subsidies was Rs 27,000 crore for the year ended March 31, 2010.

Another major issue facing power sector is the high Aggregate Technical and Commercial (AT&C) losses, which is around 28 per cent.

The issues are great and the challenges to overcome the issues are even more.

Major challenges can be taken up as:

(i) Lack of credible information  :Improper consumer database is the biggest obstacle for the discoms for proper billing and collection of revenues. There is a need  for implementation of comprehensive IT interface system that can provide exact baseline data about their assets ,consumers and finances.Lack of proper information hinders decisions in estimating losses, arresting theft or making investments.

Govt. of India has taken up R APDRP(Restructured Accelerated Power Distribution reform Program)  as focus on assessing actual performance of discoms in terms of loss reduction.

In which Part A includes establishment of baseline data and IT applications like Meter reading,Billing ,Collection ,GIS,MIS,energy Audit ,Customer care services to get verified baseline AT&C losses.

Part B includes distribution strengthning projects for reduction of AT&C losses and increasing network reliability.

Though Part A is still in completion stage, i.e. there is still a slow response from discoms side is seen but once implemented, it will enhance accountability and pave the way froward to new technologies as Smart grid.

(ii) Regulatory Framework: The Shunglu committee report emphasised that most of the distribution companies problems were due to the infrequent tariff fixation and inadequate coverage of increasing costs. Recent example can be taken of delhi private companies(NDPL, BSES)  who have moved to court for indifferent tariff prices  incurring to huge losses.

There is a need to depoliticize the sector to stop any political intervention in the working of discoms and the regulator.The regulator needs to set tariff regularly according the fuel price change and must do it under universal service obligation i.e. considering all consumers (rural and urban) together.There should be disciplined standards of performance and penalties for service deficiencies.

(iii)Better technology for discoms: All the discoms today need better and energy efficient technology and govt. needs to finance good amount of funds in this direction rather than focusing the funds in subsidies and cross subsidies.Better infra, equipments, automation, consumer interfaces and services will lead to huge reduction in losses.

(iv) Segregation across business elements: According the Shunglu report, the unbundling and restructuring of the SEBs was done across the country after Electricity act 2003, but it was majorly done on papers, but not in true sense. There is a need for proper segregation of Generation, transmission and distribution sectors for proper energy accounting  and loss calculation.Apart from that this will be the base for implementation on IT interface for moving the Smart grids in the future ahead.

(v)Agriculture and rural consumption segregation:Apart from unbuldling,the discoms need the focus on segregation of agriculture and rural feeders. The CEA data reveals that estimated agricultural connected load in country is more than 66000MW contributing to 19% of country connected load.

The load segregation can be used to estimate accurate agricultural and rural consumption in states impacting loss calculations as well as agricultural consumption will help subsidy estimations for the state discoms.

(vi) A step forward towards the PPP model: The govt. must make way for attracting the private players in the distribution sector in different forms as Multi Licensing model, Outsourcing activities,Privatization and Franchisee models.

After the learnings from Orissa privatization model and success of Delhi privatization model. Same models can be replicated in other parts of the country.

Other than privatization model, Franchisee model of PPP has seen huge success in Bhiwandi and are recently coming up in some major cities of Agra,Kanpur(by torrent Power),Nagpur( Spanco) ,Aurangabad.

Distribution franchisee model at present seem to be the way forward in PPP model and govt. must encourage more players to be involved.


While currently the govt. has shifted its focus on the distribution sector and its losses. Several schemes such as RAPDRP and RGGVY , on proper implementations will definitely help the cause.



Student, MBA Power Management NPTI Faridabad.

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