On optimizing power distribution (Discoms)

The Prime Minister, Shri Narendra Modi, last week chaired a roundtable meeting on renewable energy, with top energy CEOs and experts were present at the roundtable. Among the views expressed at the roundtable, was a clear assertion that India has the makings of becoming the “clean energy world capital.” A related thought was that the current grid is not designed for carrying the 175 GigaWatts (GW) of renewable energy that India is targeting, and therefore a complimentary effort is required on the grid side.

The Prime Minister shared an overview of initiatives already undertaken in the area of renewable energy, such as Kochi Airport becoming a solar-powered airport, and solar panels being installed over a canal in Gujarat. He said that early next month, a district court in the tribal belt of Jharkhand will become entirely solar-powered. He expressed confidence of a renewable energy revolution over the next decade.

Experts expressed concern at the financial status of power distribution companies (Discoms) in India. In India, the share of private sector in power generation has risen substantially over the past few years, but state electricity boards continue to own nearly 95% of the distribution network. Thus, the entire value chain of the power sector in India is dominated by the state owned companies.

Over the period of time, they have become unviable and unprofitable due to heavy accumulated losses and liabilities. India’s power distribution segment is plagued by losses such as Power Theft, Non-billing, Incorrect billing, Inefficiency in collection, Leakage in transmission, faulty distribution system and Lack of investment.

Recently Finance Minister Arun Jaitley told State discoms to shape up to get bank funding. Speaking at the Indian Banks’ Association’s annual general meeting recently Jaitley observed that there are many States that are in dire straits as far as their discoms are concerned and in the case of some the situation is reasonably challenging.

The performance of discoms are critically dependent on the independence of regulators in policy making and implementation. I strongly feel India requires a more proactive regulatory approach where the regulators are given the latitude to proactively steer the sector.

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