NITI Aayog and RMI Release a Report on Power Distribution Sector

What is the News?

NITI Aayog and RMI have released a report titled “Turning Around the Power Distribution Sector”.

Purpose of the Report:

• The report presents a review of reform efforts in the Indian and global power distribution sector. It extracts the learnings and best practices from policy experience that exists in the country.

Key Findings of the Report:

Power Distribution Sector in India:

• Most power distribution companies (or discoms) in India incur losses every year—the total loss is estimated to be ₹ 90,000 crores in FY 2021.
• Due to these accumulated losses, discoms are unable to pay for generators on time.
• Reasons: Part of the reason for these losses is the tension between two different outlooks:
  1. Is electricity an essential public service whose provision at low rates is necessary for citizen welfare, or
  2. Is it a commodity to be bought and sold on the market like any other?

Reforms suggested by the Report:

• Discom Restructuring: Only 10% of India’s population is served by private distribution licensees. Hence, good Corporate Governance and higher private participation in distribution hold out the possibility of greater efficiency.
• Regulatory Reforms: The state governments should promote autonomy, competence and transparency of the State Electricity Regulatory Commission(SERC).
• Operational Reforms: The overall AT&C loss figure in India is as high as 24.54%. Many discoms need to improve their billing efficiency through better and smart metering.
• Renewable Energy Integration Reforms: Discoms need to prepare to accommodate an increasing amount of renewable energy (RE), from generators as well as prosumers.
• Managerial Reforms: Effective reforms such as easily accessible call centres, convenient bill payment facilities can help reduce customer dissatisfaction and increase revenue. Moreover, Performance incentives can also help align discom employees to the interests of the organisation.