Sticking to animal metaphors, distribution has for long been the ugly duckling of the power sector. Any discussion on power sector reforms went straight to Transmission and Distribution (T & D) losses — often called Theft and Dacoity. Free power, tangled wires, illegal connections, burnt-out transformers, wrong billing, unpaid bills — distribution was blamed for all the ills, and possibly rightfully so. Generation was the topic that excited the hoi polloi, with conversations on ultra-mega, non-conventional, nuclear, fuel linkage and sustainability energising the drawing rooms of politicians and corporate honchos.
But quietly, the ugly duckling of the power sector – distribution – is morphing into a gracious white swan. And the credit for this massive, yet quiet, shift should be clearly given to the central government.
My colleague Devtosh Chaturvedi, an acknowledged expert in this area, has been tracking distribution reforms for over a decade.
He has watched the Tenth Plan’s Accelerated Power Development and Reform Programme (APDRP) invest Rs 17,500 crore into the distribution sector but with no commensurate results. Funds were channelled for procuring sophisticated equipment for substation revamping. But dedicated measures to reduce Aggregate Technical and Commercial (AT&C) losses were left unattended. APDRP, therefore, was perceived as an ad hoc financial intervention, input-focused instead of output-oriented and limited to select Centre of Excellence (CoE) circles.
It was with these learnings that the Restructured Accelerated Power Development and Reform Programme (RAPDRP) was introduced in the Eleventh Plan. This revamped programme laid out clear objectives of actual demonstrable performance, in terms of sustained AT&C loss-reduction, through IT enablement, distribution system strengthening and capacity building.
Part A of the programme, with a budgeted outlay of Rs 10,000 crore focuses on the determination of accurate baseline AT&C losses using information and communication technologies.
Part B, with a budgeted outlay of Rs 40,000 crore, focuses on renovating, modernising and strengthening the distribution system.
Part A allows utilising 100 per cent of the central funds as loans, which can be converted into grants once the required deliverables are established. Completion within three years from the date of sanctioning is mandatory.
Projects under part B start only after certain operational preconditions are met. Utilities eligible for funding include those with AT&C losses above 15 per cent. For projects taken up under Part B, the conversion into grant takes place yearly based on the AT&C loss figures of the project area duly verified by an independent agency. Failure to achieve or sustain the AT&C loss-reduction target in a particular year results in that year’s tranche of loan-to-grant conversion reducing in proportion to the shortfall.
It is evident that this two-phased approach of the RAPDRP and the outcome-based funding mechanism have been prudently crafted to ensure that:
With such huge amounts of public expenditure, the RAPDRP also presents an attractive market opportunity for domestic and international players ranging from consultants (process, IT, SCADA, monitoring, verification); trainers (capacity building); vendors (automation, IT solutions, metering, network and communication solutions); system integrators, and equipment manufacturers.
As these interventions are gaining momentum, preliminary estimates show that AT&C losses are taking a perceptible dip. Centralised fund allocation and tight central monitoring – the Power Finance Corporation (PFC) is the nodal agency – have ensured that the programme is rolled out in a largely transparent and effective manner.
A reality check across utilities reveals a few challenges that remain.
The key issue, however, is that this scheme is not merely about technology and infrastructure strengthening. Successful reform lies in ensuring motivated participation and sustainability at the ground level energised by a proactive political and bureaucratic regime. Issues around governance and administration, therefore, gain ascendancy over one-time implementation. These are sought to be achieved by:
It is abundantly clear that this scheme is good for the utilities, since it translates to improved financial viability and development of preparatory infrastructure towards smart grids. It is also good for the private business participants, for it presents lucrative market opportunities and a wider customer base.
What about the end-consumer? Well, inherently, it would bring into its fold consumers who are currently not paying for electricity or are paying less than what is due. It is anticipated that, ultimately, the genuine benefit for the end-consumer would emerge by way of access to reliable supply and tariff rationalisation. At a national level, cleaning up the distribution sector translates directly to cleaning up the bankability of the power sector as a whole. The tail wags the dog.
Interventions in the city-distribution reform space have attracted attention in recent times. Most notable, of course, was the Delhi privatisation, followed by urban-franchisee models in places like Bhiwandi and Agra. Critics point out a distinct urban bias. But with Rajeev Gandhi Grameen Vidyut Yojna (RGGVY) endeavouring to build the rural electrical infrastructure, extending this programme to the rural segment is something the reform experts would surely be grappling with in the medium term.
Clearly, the scheme has much to commend itself. With a well-conceived modus operandi and an environment-facilitating private participation, it is poised to be a game-changer for the power sector.
Here’s a thumbs-up to the power ministry, PFC and the Kendriya Sarkar. It looks like the RAPDRP dog will bite too.
The writer is Chairman, Feedback Ventures. The views expressed are personal
