Overview of Power Distribution In India

As per Electricity Act 2003 "distribution system" means the system of wires and associated facilities between the delivery points on the transmission lines or the generating station connection and the point of connection to the installation of the consumers.

India's power sector is characterized by inadequate and inefficient power supply. While installed power capacity has increased from a meager 1362 MW to over 190592 MW in March 2012 since the country's independence, consumers are confronted with frequent power cuts, and fluctuating voltages and frequencies. In addition, system losses are high throughout India's transmission and distribution (T&D) networks. The financial health of power distribution companies (discoms) is a major worry for the whole country. Going by Shunglu committee report estimates, discoms incurred a staggering loss of INR  82,000 Crore last 5 years ending March 2010,estimating that the losses of discoms have been rising over the years and will keep on increasing unless some stringent and disciplined policies are followed by the discoms.

Distribution is considered as the weakest link in the power sector due the large energy losses occurring at the distribution end. The distribution losses in India's power sector occur on both sides of the energy meter – the utility side as well as the consumer side. On the utility side, the main causes for the energy losses are non-standard and antiquated distribution engineering practices, inefficient and overloaded distribution equipment, faulty and poor maintenance practices, a lack of investment in system upgrade, faulty meters, and poor commercial management and accounting practices. At the consumer end, the problems leading to avoidable energy and revenue losses are lack of meters, prevalence of flat rate tariffs over metered tariffs, non-payment, theft, illegal connections, a lack of consumer education in the rural sector, rampant political interference, and inefficient electricity use. The Transmission & Distribution (T&D) losses have been consistently on higher side in India, to the level of up to 25.47% in the year 2008-09, while the Aggregate Technical and Commercial (AT&C) losses during the same year were 27.74%. 

Existing Distribution Models in India:

Power distribution companies (discoms) can be broadly classified into three models, based on their ownership, viz., state-owned discoms, privately owned discoms, and  distribution franchisees.

  • Government Ownership: Government-owned distribution utilities can be divided into two categories, viz., state electricity boards (SEB) and unbundled discoms. Barring a few states such as Bihar, Jharkhand and Kerala that are yet to unbundle their SEBs, all other SEBs have been unbundled into separate generation, transmission, and distribution companies. There are exceptions such as Punjab and Tamil Nadu that have restructured their boards into two companies --one handling generation and power distribution, and the other operating the transmission business.
  • Private Ownership: Calcutta Electricity Supply Co. Limited (CESC) and Tata Power Company Limited (TPCL), which are privately held, have been respectively operating in the cities of Kolkata and Mumbai for several decades now. Orissa was the first state to privatise its electricity distribution, disinvesting 51% of the state government's stake in private companies .
  • Distribution Franchisees: The public-private partnership model has made its way through in the power sector along with other infrastructure segments. Legal and regulatory provisions allow a distribution licensee to authorize a person/entity to distribute electricity on its behalf in a particular area within its area of supply, as a distribution franchisee. The franchisee initiative has enabled private sector participation in the power distribution sector while continuing with government ownership. This model enables greater private sector participation by reducing regulatory and political risk assumed by investors in a full privatization model. e.g Torrent power in Bhiwandi (Maharashtra), Agra (Uttar Pradesh).

Various Reports on Distribution in India: 

Shunglu Committee

The Shunglu committee  had said that during the five years period (from 2006 to 2010), losses were INR 1,79,000 Crore before subsidy and INR 82,000 Crore after subsidy. These losses were primarily because of the gap of about INR 0.60/kwh between average cost and average revenue.

ICRA Report

Ratingagency ICRA projected the losses for discoms — before accounting for government subsidy — in the country at INR  80,000 Crore in FY 2012, much higher than INR  63,500 Crore seen in FY 2010. Estimates are based on a study of power distribution companies (discoms) functioning in 11 states."Taking the subsidy into account, the total book losses for discoms are estimated at INR 38,000 Crore in FY 2012," it said. About 70 per cent of the estimated loss was on account of discoms in Uttar Pradesh, Tamil Nadu, Madhya Pradesh, Rajasthan, Punjab and Haryana, also  such losses have largely been funded through bank borrowings and stretched payments to power creditors, especially state-run generating companies. 

Chaturvedi panel

The committee, headed by Planning Commission Member B K Chaturvedi, has been formed in 2011 and is looking at financial health of discoms in seven states including Tamil Nadu and Uttar Pradesh.This would be the second expert group assessment on power distribution companies after the Shunglu panel report that had pegged accumulated loss of discoms at INR  82,000 Crore for the 2006-10 period. The panel is expected to finalise its report by 2012, according to a Power Ministry. 

Interventions in Distribution Sector: To match the required capacity addition and to meet the demand of consumers, the growth of distribution system is an issue. At the same time operation of electricity distribution system has to be on commercially viable basis. This broadly calls for following; 

  • Rationalization of tariff to reduce gap between ARR and ACS
  • Adequate investment to strengthen distribution network
  • Formulation of Enforcement Strategy to prevent theft.
  • Real time energy accounting and auditing
  • Adoption of enhanced revenue management techniques
  • Improved load management
  • Reduction of subsidy from the Government.
  • Managerial intervention and brining accountability
  • Cooperation from employees
  • Sound financial restructuring plan
  • Reliability of Distribution System

Reliability of Service needs to be always given prime importance by electric utility system. Consumer is least interested about the availability of power sources, grid conditions but he must be ensured a power supply, which is most reliable and qualitative. Reliability to a consumer means that power made available to him is fault free and the outage or interruptions are tolerable and do not disturb his normal life. Every customer is connected to a feeder emanating from a sub-station through wires, transformers etc. It is fairly common practice in the electric utility industry to use the standard IEEE reliability indices like CAIDI, SAIFI, SAIDI to track and benchmark reliability performance. 

  • SAIDI (System Average Interruption Duration Index): SAIDI is more commonly known as "average customer minutes off supply" and is generally reported over a one-year period. It is the total on average interruption duration in minutes per year experienced by customers for both planned and unplanned interruptions. A SAIDI of 200 minutes means that customers connected to the feeder or supply area being measured experience in average 200 minutes off supply in 12 months.
  • SAIFI (System Average Interruption Frequency Index): SAIFI is a measure of how often an average customer loses supply during one year. A SAIFI of 3 means that the average customers connected to the feeder or supply area being measured on average lost supply thrice during the past 12 months.
  • CAIDI (Customer Average Interruption Duration Index): Itgives the average outage duration that any given customer would experience in a years time.
  • CAIDI = sum of all customer interruption durations / total number of customer interruptions = SAIDI / SAIFI

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