7 PM | Prepaid power is not the silver bullet to solve problem of discom finances | 19th March 2020

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Context: Smart Meters and Power sector in India.

The Union Finance Minister, while presenting the Budget 2020-21, urged states and union territories to replace all conventional electricity meters with prepaid smart meters over the next three years.

This brings us to the questions of power sector in India with specially focussing on Smart Meters. In this article, we will explain the below:

  • What is status of India’s Energy demand?
  • What are Smart Meters?
  • What is the need of Smart Meters?
  • What is the Smart Meter National Programme?
  • What is Energy Efficiency Services Limited (EESL)?
  • What are the doubts on the wisdom of rushing for smart metering?
  • What are various government initiatives taken to boost power sector?

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What is status of India’s Energy demand? 

  • India is the 5th largest producer of electricity in the world, with Maharashtra as the leading electricity generator among Indian states.
  • At an electricity-GDP elasticity ratio of 0.8, electricity will continue to remain a key input for India’s economic growth.
  • India’s energy demand outpaced global demand growth in 2018 according to the International Energy Agency.
  • India’s primary demand rose 4% in 2018 Vs 2.3% growth seen worldwide.
  • Electricity demand is likely to reach 217 GW by 2021-22.
  • According to EESL, electricity demand in India is expected to rise by 79 percent in the next 10 years.

What are Smart Meters?

  • A smart meter is a digital meter that replaces old analog meters, which are used in homes to record electrical usage.
  • These digital meters can transmit energy consumption information to the utility (as it is connected to the internet) in frequent intervals, and can monitor consumption more precisely, thereby enabling more informed energy choices.
  • Smart Meters have following advantages:
    • For consumers, smart meters help in monitoring and managing electricity consumption and save money. It can be like your mobile pre-paid connection.
    • It can reduce billing errors.
    • Smart meters help power distribution companies (discom) to conduct power-quality analysis in near-real time, taking into consideration factors such as maximum demand, voltage fluctuation, outage detection etc.
    • It helps discoms reduce peak power purchase cost, thereby improve business efficiency. This in turn reduces their debt, thereby helping the economy.
    • Smart meters also aids in the recovery of receivables, which has caused a huge stress on the system.

What is the need of Smart Meters?

  • India’s average aggregate technical and commercial (AT&C) losses are at 21.4%, pushing up the dues of discoms to power generating companies to ₹72,938 crore at the end of November 2019.
  • Prepayment can be a remedy for the financial ailments of the electricity distribution companies (discoms), thus solving a long-standing problem.
  • Consumers are expected to be empowered to plan consumption in an efficient manner and be able to choose the supplier and tariff plan in a future multiple supplier system.

What is the Smart Meter National Programme?

  • Smart meters are the third pillar of the proposed technology-driven transition in electricity systems globally, in addition to renewable energy and energy storage technologies.
  • (SMNP) is working to eventually replace 25 crore conventional meters with smart meters across India.
  • It is being implemented by Energy Efficiency Services Limited (EESL).
  • In the larger scheme of things, the programme will holistically promote the Indian manufacturing industry while creating more direct and indirect jobs.
  • The programme is expected to better billing efficiency by 75 to 100 percent while increasing the revenues of the utility companies to Rs. 1,38,100 crore.

What is Energy Efficiency Services Limited (EESL)?

  • Energy Efficiency Services Limited (EESL) is a Super-Energy Service Company (ESCO), which enables consumers, industries and governments to effectively manage their energy needs through energy efficient technologies.
  • EESL is implementing the world’s largest non-subsidised energy efficiency portfolio across sectors like lighting, buildings, e-mobility, smart metering and agriculture at a scale which no organization has been able to achieve.
  • EESL focuses on solution-driven innovation with no subsidy or capital expenditure (CAPEX).
  • It is able to do so using its Pay-As-You-Save (PAYS) model, which obviates the need for any upfront capital investment by the consumer.
  • EESL is promoted by the Ministry of Power Government of India as a Joint Venture of four reputed public-sector undertakings – NTPC Limited, Power Finance Corporation Limited., REC Limited, and POWERGRID Corporation of India Limited

What are the doubts on the wisdom of rushing for smart metering?

  • Prepaid meters address only a small part of the problem of discom finances – non-payment of billed amounts. Non-payment accounts for the smallest share of discom losses which is about 2.5 per cent in the 21 per cent AT&C loss (based on the power ministry’s claim that the Ujwal Discom Assurance Yojana has improved collection efficiency to 97 per cent). However, discom losses have two additional components: Line losses in the distribution network, and theft outside the meters, neither of which will be helped by smart meters. Thus, Instead of imposing stricter discipline on a small number of defaulters, the Centre is choosing to impose prepayment on all customers.
  • Smart meters will require access to network and support architecture to transmit and store data. There is no clarity on the network costs, who will bear it, and the impact on the electricity bills of the poor.
  • Prepaid smart meters are advocated as pro-poor arguing that prepaid meters allow payment in small, affordable fragments, offer a sense of disciplined autonomy and control over consumption, and thus, relieve the poor of the debt they accumulate with the discom. However, poor agriculture-dependent households currently treat electricity dues as a credit option that is accumulated during the lean period and paid in the harvesting season. Prepaid meters could increase the incentive for theft as prepaid system may push poors towards finding ways to bypass the meter to access electricity.

What are various government initiatives taken to boost power sector?

  • Electricity Act 2003has been enacted and came into force from 15.06.2003.
    • The objective is to introduce competition, protect consumer’s interests and provide power for all.
    • The Act provides for National Electricity Policy, Rural Electrification, Open access in transmission, phased open access in distribution, mandatory SERCs, license free generation and distribution, power trading, mandatory metering and stringent penalties for theft of electricity.
    • The aim is to push the sector onto a trajectory of sound commercial growth and to enable the States and the Centre to move in harmony and coordination.
  • Ujwal DISCOM Assurance Yojana (UDAY):
    • UDAY provides for the financial turnaround and revival of Power Distribution companies (DISCOMs), and importantly also ensures a sustainable permanent solution to the problem.
    • It empowers DISCOMs with the opportunity to break even in the next 2-3 years. This is through four initiatives
      • Improving operational efficiencies of DISCOMs;
      • Reduction of cost of power;
      • Reduction in interest cost of DISCOMs;
      • Enforcing financial discipline on DISCOMs through alignment with State finances.
  • Deendayal Upadhyaya Gram Jyoti Yojana (DUGJY): The Ministry of Power has planned to provide electricity to 18,500 villages in three years. The major components of the new scheme are feeder separation; strengthening of sub-transmission and distribution network; Metering at all levels (input points, feeders and distribution transformers); Micro grid and off grid distribution network & Rural electrification.
  • PM KUSUM: Ministry of New and Renewable Energy (MNRE) has launched the Pradhan Mantri Kisan Urja Suraksha evem Utthan Mahabhiyan (PM KUSUM) Scheme for farmers for installation of solar pumps and grid connected solar and other renewable power plants in the country. The scheme aims to add solar and other renewable capacity of 25,750 MW by 2022.


The Centre’s push for smart meters may be an important ingredient for transitioning to a 21st century electricity-system. However, let us not pretend it is the silver bullet to solve the long-standing problems of discom finance and losses, and accountability and governance in the Indian electricity system.

Source: https://indianexpress.com/article/opinion/columns/smart-meters-ministry-of-power-6320887/


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