- Overview
Due to lack of adequate investments on T &
D networks, the T & D losses have been consistently
on the higher side, and are presently in the
range of 18% to 62% in various states. Reduction
of these losses by undertaking distribution
system improvement works has not been possible
for want of adequate funds. The aggregate
technical and commercial (AT&C) losses are
in the range of 50%.
High technical losses in the system are primarily
due to inadequate investments over the years
for system improvement works, which has resulted
in unplanned extensions of the distribution
lines, overloading of the system elements
like transformers and conductors, and lack
of adequate reactive power support. By undertaking
suitable system improvement schemes based
on computer studies it should be possible
to bring down the technical losses in the
distribution system to the level of 9%.
The commercial losses are mainly due to low
metering efficiency, theft and pilferages.
Improving metering efficiency, proper energy
accounting & auditing and improved billing
& collection efficiency may eliminate this.
Fixing of accountability of the personnel
/ feeder managers may help considerably in
reduction of AT&C loss.
The Distribution Reform was identified as
the key area to bring about the efficiency
and improve financial health of the power
sector. Ministry of Power took various initiatives
in the recent past for bringing improvement
in the distribution sector.
For giving boost to the reform programme, the
Ministry of Power formulated a six level intervention
strategy for distribution reforms at National,
State, SEB, Distribution Circle, Feeder and consumers
levels to ensures accountability, deliverability
and performance at all level.
- National level interventions
The national level intervention includes providing
for a legal framework for ushering distribution
reforms like enabling local institutions to
manage distribution, third party sale, remote
metering, removal of cross subsidies, penal
provision for thefts etc.
- State level interventions
The States are being asked to sign MOUs with
the Ministry of Power to set up SERCs restructure
SEBs, remove cross subsidies and tariff anomalies,
provide budgetary support to SEBs towards
subsidies, introduce privatization etc. So
far 28 States have signed MOUs with the Ministry
of Power, 21 States have constituted SERCs,
17 State Regulatory Commissions have issued
tariff orders and 9 States have unbundled
/ corporatised their SEBs.
- SEB level intervention
The State Electricity Boards were asked to
sign an MOA with the Ministry of Power to
carry out distribution reforms. This would
lead to increased accountability, introduction
of commercial accounting, setting up of online
management information systems, reduction
of T&D losses, introduction of bench marking
of crucial parameters that cover consumer
satisfaction and system stability.
- Distribution Circle level interventions
At this level, the Technical, commercial and
administrative interventions for reducing
outages, improving reliability, reducing technical
and commercial losses are envisaged. The Superintending
Engineer will be the Chief Executive Officer
of the distribution circle. Each circle will
work as an independent profit center.
- Feeder level intervention
11 KV Feeders will be operated as business
units that will be accountable for quality
of power and reliability, metering, billing
and collection.
IT applications covering remote metering at
feeder and distribution transformer levels
will be the mainstay for monitoring and collection.
Replacement of conductors and energy efficient
distribution transformers, metering of feeders
and distribution transformers, reducing HT/LT
ratio, segregation of technical and commercial
losses etc. are envisaged.
- Consumer level intervention
Mandatory metering with digital interface
for all consumers, prepaid metering, incentives
for energy efficiency are envisaged here.
It is expected that demand will grow to 782 billion
KwH by 2006-07 and by the end of 11th Plan (2007-2012),
a total capacity addition of around 70,000 MW
is envisaged, entailing huge investment opportunities
in distribution sector. State governments have
agreed to allow the gradual entry of the private
sector in distribution.
To expedite power sector development, Ministry
of Power has implemented policy changes and initiated
various programmes. Some important initiatives
are described below in brief.
The Electricity Regulatory Commission
Act, 1998
It fulfills the commitment of providing statutory
bodies like Central Electricity Regulatory Commission
(CERC) and State Electricity Regulatory Commission
(SERCs) to bring into effect rationalization of
electricity tariff and transparent policies regarding
subsidies for regulation of inter-state transmission
of energy and promotion of efficiency and environmentally
benign policies. CERC has been set up by Central
Government and many States have set up/initiated
action to set up their regulatory mechanisms.
Electricity Laws (Amendment) Act, 1998
As transmission was not a separate activity under
the Electricity Laws, there was inadequate investment
in this sector. Through the Electricity Laws (Amendment)
Act, 1998, this lacuna has been removed and the
way paved for facilitating more investment in
the transmission sector as well as coordinated
operation of the grid system. Guidelines have
been issued for private sector participation in
the transmission sector.
Energy Conservation Act, 2001
Today the total cost of energy is one of the prime
causes of concern for SEBs, industries, corporate
houses, commercial buildings etc. Government of
India has therefore taken steps in the direction
of energy conservation and has enacted “Energy
Conservation Act in 2001. The Act primarily ensures
energy efficiency in consumption and consequently
Demand Side Management (DSM) for reducing need
for installing new capacity.
Bureau of Energy Efficiency (BEE)
Bureau of Energy Efficiency set up in 2001 under
the provisions of EC Act 2001, has been formulating
standards for energy consumption and labeling
on appliances and equipment, demand side management,
efficient lighting, energy conservation building
codes, consumer awareness etc. Conduction of energy
Audits and implementation of the recommendations
of feasible energy efficiency measures are made
mandatory for the industries like cement, textile,
paper, sugar etc. This will definitely produce
substantial energy saving and will give a significant
push to the energy saving programme in the country.
Electricity Act 2003
Earlier plans of reforms were primarily skidded
because of more emphasis on the power generation
and keeping the transmission and distribution
completely in the background.
Passing of Electricity Act 2003 has attempted
to encompass all areas of power sector viz, generation,
transmission and distribution. It has opened up
competition in power sector, kept the consumer
as focal point and provided avenues for investment.
Further, generation has been de-licensed, captive
power policy has been liberalized and open access
is provided for transmitting power. Apart from
this, stringent provisions are made to minimize
theft and misuse. The Act has also given consideration
for promoting access to electricity in rural areas
and for economically weaker persons.
The objective is to introduce competition, protect
consumer’s interests and provide power for all.
The Act provides for National Electricity Policy,
Rural Electrification, Open access in transmission,
phased open access in distribution, mandatory
SERCs, license free generation and distribution,
power trading, mandatory metering and stringent
penalties for theft of electricity.
Accelerated Power Development Reform Program
(APDRP)
In February 2001, Government introduced the programme
for solving the problem of power sector with the
vision of supplying reliable, affordable and quality
power for all users by 2012. More emphasis is
on up-gradation of sub-transmission and distribution
through 100% metering, reducing T&D losses, energy
audits, power factor correction measures etc.
A qualitative improvement in power supply at the
consumer end was expected so as to raise the level
of satisfaction besides improving revenue realization
for the utilities.
The objectives of APDRP are:
- Improving financial viability of State Power
Utilities
- Reduction of AT & C losses to around 10%
- Improving customer satisfaction
- Increasing reliability &quality of power
supply
The scheme has two components as below:
Investment component – Government
of India provides Additional Central Assistance
for strengthening and up gradation of sub-transmission
and distribution network. Additional Central Assistance
covers 50% of the project cost in from of 50%
grant and 50% loan. SEBs and Utilities have to
arrange remaining 50% of the fund from Power Finance
Corporation (PFC) and Rural Electrification Corporation
(REC) or other financial institutions or from
their own resources as counter-part fund. For
Special category states 100% of the project cost
is provided as Additional Central Assistance in
the ratio of 90% grant and 10% loan. (States of
northeastern region, Jammu & Kashmir, Himachal
Pradesh, Uttaranchal and Sikkim are covered under
special category).
Incentive component - An incentive
equivalent to 50% of the actual cash loss reduction
by SEBs/ Utilities, is provided as grant. The
year 2000-01 is the base year for the calculation
of loss reduction, in subsequent years. The cash
losses are calculated net of subsidy and receivables.
APDRP is an instrument to leverage distribution
reforms in the States. Therefore, priority is
being given to projects from those States who
have committed themselves to a time-bound programme
of reforms as elaborated in the Memorandum of
Understanding (MoU) and Memorandum of agreement
(MoA) and are progressing on those commitments.
With funding from both, REC and PFC, Interest
subsidy @ 3% - Rs. 1,500 cr. during 10th Plan,
Loan up to about Rs. 10,000 crores would be available
mainly for Renovation & Modernization (R&M) of
power plants.
Implemented inculcating grid discipline, Grid
stability, Frequency and Voltage profile have
improved substantially.
In continuation with these efforts of improving
the power sector, Government of India, in association
with USAID, has launched Distribution Reform,
Upgrades and Management (DRUM) project, a five-year
bilateral project with a planned funding of Rs.135
Crore ($30 Million) over the life of the project.
The project is aimed at improving the distribution
system, especially in the rural areas, and promoting
efficiency & conservation in the management of
water and electricity resources.
In February 2005, National Electricity Policy
(NEP), in compliance with section 3 of the Electricity
Act was passed. The policy is in line with the
overall direction of reforms. The policy, which
is well crafted, covers:
- Power to all by 2012
- Urgent rural electrification
- Reducing T & D losses
- Better cost recovery and Targeting of subsidies
- Greater power sector participation
- Need for technology in all spheres of the
sector.
- Protection of Consumer Interest
The policy is well defined to convert vision set
by Electricity Act, 2003 into reality. A clear
agenda and priority before all stakeholders (the
Union Government, the Central Electricity Authority
and the regulators) has been set up.
Hon’ble Prime Minister Dr. Manmohan Singh recently
launched a new scheme for creating rural electricity
infrastructure and completing household electrification
named as “Rajiv Gandhi Grameen Vidyutikaran Yojana
– Scheme of Rural Electricity Infrastructure and
Household Electrification”.
Since independence so far only about 44% rural
households could be given access to electricity
and more than one lakh villages are still to be
electrified. The new programme involves providing
access for electricity to 7.8 crore rural households
in five years.
The scheme, to be implemented through Rural Electrification
Corporation, will provide 90% of the capital cost
of the programme by the Central Government as
grant for creating:-
- Rural Electricity Distribution Backbone
(REDB) with at least one 33/11 KV (or 66/11
KV) substation in each block.
- Village Electrification Infrastructure (VEI)
with at least one distribution transformer
in each village/habitation.
- Decentralized Distributed Generation (DDG)
Systems where grid supply is not feasible
or cost-effective.
Date Source : C.M.I.E. (Sept 2003)
