Revamped Distribution Sector Reform Scheme

News: Launched in July 2021, the Revamped Distribution Sector Reform Scheme (RDSS) is the latest of many central government grant-based programmes towards electricity distribution network investments.

Details:

  • Revamped Distribution Sector Reform Scheme’s (RDSS)has outlay of Rs 3 lakh crore for five years.
  • Half of the outlay is for better feeder and transformer metering and pre-paid smart consumer metering.
  • The remaining half, 60 per cent of which will be funded by central government grants, will be spent on power loss reduction and strengthening networks.
  • RDSS stipulates universal pre-paid metering but post-paid options may be suitable in many contexts.
  • RDSS suggested measures such as privatisation and franchisee adoption.

Issues

  • RDSS has inherited several design issues from its predecessor schemes.
  • Only 60 per cent of the total Rs 2.5 lakh crore grants allocated in past schemes were disbursed.
  • Lack of public review and regulatory oversight in states is another issue.
  • The prescriptive approach of the scheme design impedes effective implementation.
  • For example, RDSS emphasises loss reduction investments over system strengthening.
  • However, high losses are typically connected to sustained poor quality service which, in turn, is affected by inadequate investment in system strengthening.

Opportunities for discoms under RDSS

  • It is important to strengthen rural networks to meet growing demand. In the past decade, 9 crore poor households have been electrified and more than Rs 50,000 crore has been invested in rural networks. However, actual investments have been much less than planned. Transformer and sub-station capacities were designed to meet the minimal demand assuming few lights, fan and TV. Increased supply hours, appliance usage and the needs of rural enterprises will need more network investment. Without this, the risk of power outages is high. The RDSS system’s strengthening plans can focus on this challenge.
  • About 25 per cent of electricity sales is to highly subsidised, agricultural consumers who also receive erratic, poor quality supply. Under the national KUSUM scheme, day-time, low-cost supply can be provided to a large number of farmers by installing megawatt scale solar plants. For this to work, separate feeders for agricultural consumers are needed. RDSS prioritises investments and grants towards dedicated agricultural feeders to accelerate feeder solarisation. States must leverage this grant support to provide reliable supply and reduce subsidy requirements.
  • Despite efforts, unmetered consumers and non-functional meters at the consumer and feeder level persist.
  • Often, discoms under-estimate losses by over-estimating unmetered consumption in a bid to demonstrate loss reduction. For greater veracity, all feeders must be equipped with meters capable of communicating readings without manual intervention. States should leverage RDSS’s emphasis on automatic meter reading for this.
  • RDSS prescribes a phase-wise roll-out of consumer smart meters, starting with commercial and industrial consumers and urban areas. Such an approach provides states with an opportunity to understand implementation issues, adopt suitable strategies for metering and evolve frameworks for assessing benefits vis-a-vis the costs.
  • The network can be prepared for charging electric vehicles. Discoms can avail 60 per cent of grants under RDSS for network investments required to address the demand of charging infrastructure for electric vehicles. This can accelerate a shift away from petrol and diesel fuels.

Way forward

  • To leverage various opportunities, states must emphasise the need for flexibility in prioritising investments in their action plans. Central government agencies should also be flexible in the monitoring, tracking and fund disbursal mechanisms. This should be accompanied by state-level commitments towards accelerated but deliberate implementation.
  • Despite the challenges, there are opportunities for discoms under RDSS. However, without these efforts, despite its potential, RDSS will likely be important but limited in its impact, like its predecessors.