 "Carrot & stick approach for sick power discoms")
In a bid to reduce final power rates and weed out arbitrary procurement of equipment by states, the central government is planning to standardise the price and specifications for last-mile equipment in the power distribution sector.
A list of eight major items of equipment, starting from transformers to cables and consumer meters are being reviewed by the power ministry. The Power Grid Corporation of India (PGCIL) will be the nodal agency.
The ministry is hoping to put an end to procurement of equipment and design a singular tendering process. The move is aimed at bringing down the cost of equipment, especially meters and smart meters, and also weed out corruption in the supply chain, said an official, requesting anonymity.
The ministry, in consultation with the sector, would lay down the technical specifications to invite tenders for procuring power equipment. It would also standardise the use of certain quality and type of equipment which would in turn reduce costs and improve operational efficiencies.
The procurement would be through reverse bidding on the basis of the national aggregate demand. "The ministry would aggregate the total demand for the equipment nationally. Benchmarking of the prices at the international level would create an economical model and bring down prices. The reverse bidding would then be done state-wise on a need basis," said a senior power ministry official.
The government is expecting aggregation of demand would bring down the prices of equipment, leading to considerable savings to the state. The improvement in operational efficiency is linked to the reduction in aggregate technical and commercial (AT&C) losses as suggested in the Ujwal Discom Reforms Yojana for the power distribution sector.
The new-fangled power distribution reform plan, apart from clearing the books of financially stressed distribution companies (discoms), also emphasises on reduction in AT&C losses of each state to 15 per cent from current levels by 2018-19.
Also, the new tariff policy for electricity mandates the use of smart meters for consumption above 200 units.
Among other reform measures are improving last-mile power transmission and distribution, 100 per cent metering, feeder separation for agricultural populace and procuring power from cheaper sources to bring down cost of procurement. The difference between average revenue realisation and the average cost of procurement would have to be brought down to zero by 2018-19. The State Electricity Regulatory Commissions (SERCs) will also do quarterly tariff revisions.
The state-owned power discoms, which sign up for the UDAY plan, would have their future borrowing linked to efficiency parameters. The UDAY agreement envisages reforms to percolate till the last lineman level.
"Once the cost of equipment comes down, tariff revision might not be needed at all in most of the cases. Major energy loss in large states such as Uttar Pradesh, Rajasthan, Haryana and Punjab is due to low-standard products being used. Cheap equipment is being procured across states and they not only affect the efficiency but also require regular maintenance, leading to even higher cost," said an official requesting anonymity.
As the standardisation is line with the UDAY reforms, the power ministry is hopeful of inciting interest from most of the states.
The indigenous power equipment sector is excited at this opportunity and is looking forward to working along with the government. Executives at the Indian Electrical & Electronics Manufacturers' Association (IEEMA) said this would give a massive boost to domestic manufacturing, which has been languishing under tepid demand for the past three years. IEEMA is the representative association in India with member organisations representing the whole value chain in power generation, transmission and distribution equipment.
The executives said they were in discussions with the government to finalise the specifications which could bring down the final prices but didn't hurt the bottom line of the makers.
Such an exercise of mass procurement was carried out earlier for LEDs, where the cost has come down by more than half in one year while the usage has tripled across the country.
EQUIPMENT TO BE STANDARDISED
- Distribution transformer
- Power transformer
- Conductors
- Insulators
- Feeder meters
- Distribution transformer meters
- Consumer meters - both static and smart meters
Smart meters to help monitor demand and assist when net metering kicks in
