States should realise urgency in lowering discoms losses: Power Secy

In a Q&A, Alok Kumar says the law, however, will speed up reforms, given a lot of investment is needed to meet the country's net-zero target

The Union ministry of power is at the same crossroads as the sector. While power generation is witnessing a slow shift away from fossil fuels, the other end of power distribution is still entangled in legacy issues. And the Indian power system needs to prepare for a ‘Net Zero’ future. Alok Kumar, secretary ministry of power in an interview with Shreya Jai said this is the right time to take the leap of reforms. He talked about how the ministry is pushing distribution reforms through ‘carrot & stick’ schemes, while planning the next stage in monitoring electricity availability, greening the power supply and strengthening the power infrastructure. Edited excerpts:

What is the status of Rs 3-trillion Discoms Reforms scheme announced in the last Union Budget?

Since July, when we notified the guidelines, 52 power discoms have submitted their action plans. Last week, in the first review we considered the DPR (detailed project report) and action plans of eight discoms from Uttar Pradesh, Uttarakhand, Assam and Meghalaya. This will be an ongoing process. Most states will be able to discuss and sanction their DPR in over the next two months.

We will sanction their DPR which will be 50 per cent of their tentative outlay and give them 5 per cent advance money. Their next assessment will be in October-November, and we will sanction the remaining DPR and give them further grants, based on their projects and tenders.

How is the ministry prioritising the grant to discoms?

Our priority will be loss reduction. We have told the states that the first tranche of 50 per cent DPR should be for load reduction investment such as taking up Ariel Bunch Cabling, Feeder segregation, smart metering etc. States where losses are already low, like Gujarat, they can take up projects in system modernisation and augmentation.

How are you pursuing states to enhance private participation in improving discoms’ operations?

With regards to discoms privatisation in the Union Territories, final approval has been received for Dadar and Nager Haveli and Chandigarh. Others are in various stages of approval. 

Meanwhile, we are also preparing a Standard Bidding Document (SBD) for ‘smart metering plus’. This would be similar to what was done in Bhilwada (power distribution franchisee model). The smart meter operator will also have an obligation for revenue collection. We have got an offer from the World Bank for $500 million assistance and we have suggested to them that this should be given to states which are willing to take efficiency improvement initiatives which can range from collection franchisee, distribution franchisee or privatisation. Another route is if the states want to go for efficiency improvement within the state sector, we will offer them a platform for constituting a SPV in which a CPSE such as NTPC, REC can have equity holding.

What would be the optimal fuel mix for the country with regards to our new climate commitments?

By 2030, India’s installed capacity will be 800 Gw and estimated peak demand of 325 Gw. To meet that, we will have 280-290 GW of coal, lignite and gas and more than 500 Gw will be non-fossil which will include solar, wind, hydro and nuclear.

Share of fossil fuel-based electricity will come down to 55-60 per cent by 2030 (from 70-72 per cent currently) and the balance will be completely non-fossil. But since we are growing in absolute terms, the share of fossil fuel electricity will go up in Billion Units.

What is the plan to strengthen the transmission and distribution infrastructure to support 500 Gw of RE, especially within states?

Some states are developing their transmission infrastructure through central loans and their own equity. But those which are financially challenged, we have offered them options to either form a joint venture with Power Grid or award projects through TBCB (bidding route). States can get funding for building sub-transmission and distribution infrastructure by participating in the Rs 3-trillion reforms scheme. Alternatively, there is also a window available with the additional borrowing of 0.5 per cent of their SGDP.

After achieving 100 per cent electrical connectivity, how is the Centre planning to ensure seamless supply and monitor it?

Power availability in rural areas has gone up to 20-22 hours from 12 hours earlier, and in urban areas it is 22-23.5 hours. We are building up a scheme – ‘National Feeder Monitoring Scheme’. The target is, by FY23, almost all 11kv feeders will be nationally monitored – both urban and rural. This will give us a more complete picture and we will be able to monitor. There is sufficient power generation capacity in the country. What will be critical is the ability of the discoms to pay.

Despite a fiscal support scheme, dues of discoms are on rise again, Rs 1 trillion as of now. What steps are being taken to address it?

If discoms are serious about providing reliable electricity to their consumers, then they will maintain commercial principles and financial viability. If some state chooses not to do so, they will face consequences. They will get less power, which would in turn hurt industrial investment. On the fiscal front, prudential lending norms are being enforced by PFC and REC. We have written to banks and they are also on board.

At what stage is the Electricity Bill?

Situation is worrisome in the distribution segment. India as a country has to understand the urgency and seriousness of bringing down the losses and reforms have to proceed. The Ministry has held rounds of consultations and will prepare a proposal. But we are not waiting for the legislation; we are moving ahead with several schemes. The law however will fasten up the reforms as a lot of investment and a sound system is needed to meet our Net Zero target.

What can the power sector expect from the Union Budget?

We had discussions with the finance ministry and we are hopeful of some announcements with regards to the country’s energy transition.