Indian power sector reforms increasing power supply and reducing losses

Power reforms undertaken by the Government of India have brought down the aggregate technical and commercial (AT&C) losses to 15.41% in the 2022 to 2023 financial year.

According to a government-issued release, the results mark a significant improvement in the performance of Indian power distribution, which they compare with a 25.72% loss in FY 2014-2015.

They add how, due to the reforms, the availability of power supply in 2023 increased to 20.6 hours in rural areas (compared with 12.5 hours in 2015) and 23.78 hours in urban areas.

Financial losses of distribution utilities have also come down, from Rs.46,521 crore ($5.6 billion) in FY 2020-21 to Rs.31,026 crore ($3.7 billion) in FY 2021-22.

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Under the reforms, several technical measures were taken to reduce these losses, including the strengthening of the power distribution system. Specifically, an expenditure of Rs1.85 lakh crore ($22.2 billion) saw 2,927 substations added and 3,965 existing substations upgraded.

Additionally, 692,200 distribution transformers have been installed with feeder separation of 113,938 circuit km (Ckm) and 850,000Ckm of high tension and low tension lines added/changed.

Covered wire in high loss areas were also provided and works such as gas insulated substations, underground cabling and aerial bunched cable etc. were taken up.

Additional reforms and measures cited by the Indian Ministry of Power include:

• Putting in place rules to ensure payment for any subsidy declared by the government in time.
• Ensuring that tariffs are up to date.
• Reducing the legacy dues of the generation companies, under Late Payment Surcharge Rules, which have come down from approximately Rs.1.40 lakh crore ($16.8 billion) to Rs.0.52 lakh crore ($6.3 billion).
• Ensuring that the generation companies are paid on time.
• Ensuring energy accounting and audits.
• Putting in place revised prudential norms providing that no distribution or generation company of a state government will be able to get loans from the Power Finance Corporation or the REC, a corporate finance corporation, if the distribution company is making a loss.
• Putting in place an incentive of an additional borrowing space of 0.5% of gross state domestic product if the distribution company puts in place loss reduction measures.
• Providing that loss making distribution companies will not be able to draw funds under any power sector scheme unless they put in place measures for loss reduction.

The Government of India launched the reforms-based and results-linked Revamped Distribution Sector Scheme (RDSS) on 20 July 2021 to improve the quality and reliability of power supply to consumers and reduce the AT&C losses.

The scheme has an outlay of Rs.303,758 crore ($36.5 billion) and estimated gross budgetary support from the country’s central government of Rs.97,631 crore ($11,7 billion).