Administrative Staff College of India, Hyderabad

Electricity Distribution: Challenges and

Solutions

Rajkiran V Bilolikar

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Agenda

■ Evolution of policies and Institutions

■ Achievements

■ Moving towards critical situation – Distribution Finances

■ Poor performance – operational inefficiencies

■ Some Solutions

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Evolution of Policies and Achievements

■ Amendments in 1991 to the

Electricity Supply Act opened

the sector to private

participation

■ Commercial performance of

the state utilities was critical

with losses of Rs. 25000

Crores or 1.5 percent of GDP

in 2001-2002

■ Total SEB debt to central

public power suppliers was

Rs. 40000 Crores

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Evolution of policies and Institutions

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Impressive Achievements

■ 70,000 MW in 1991 to 274 GW

in 2015 with private sector share

from 3% to 29%

■ RE – 18 MW in 1991 to 35,776

MW in 2015

■ Recognising trading as a

licensed activity

■ Opening entry into generation

■ Permitting multiple distribution

licensees

■ Separating transmission from

dispatch, trading and generation

■ Promoting open access

■ EA led to an active power

market and power exchanges

■ The shift from feed-in-tariff to

reverse auction in solar – 17.8

MW in 2010 to 3743.97 MW in

June 2015

■ RGGVY – access to electricity

rose from 59% of the population

in 2000 to 74% in 2010

■ Promising models of electricity

Distribution

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Did we really achieve our goals?

■ Power sector after tax losses excluding state governments

support to the sector, were Rs. 61,800 Crores in 2011

equivalent to nearly 17% of India’s gross fiscal deficit and

around 0.7 % of GDP

■ If subsidies are included as revenue, losses fall by more than

half to Rs. 29500 Crores

■ Aggregating profits and losses over time, sector wide

accumulated losses stood at Rs. 1,14,600 Crores in 2011 more

than twice the amount in 2003

Discoms and bundled

utilities are the largest

contributors to

accumulated losses with

the share of 86%

Just 10 years after being

bailed out, the sector is

looking for another rescue

from the centre – FOUR

times larger than before

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Reform Areas of EA 2003

■ Introduction of Competition

■ Enhanced Accountability and Transparency

■ Cost Recovery and Commercial Viability

■ Access to Electricity and Rural Electrification

■ Improved Customer Service and Affordability of Supply

■ Promotion of Renewable Energy

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Accumulated Losses by segment 2003-2011

■ Sector wide accumulated

losses stood at Rs.

1,14,600 Crores in 2011

■ In many states,

accumulated losses

amounted to large a large

share of state GDP – at

least 1% and up to 25%

■ Since 2003 total sector

losses have grown 133%

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Accumulated losses by state

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Debt owned by power sector

■ Total Debt has grown to

Rs. 3.5 Trillion in 2011

which is equivalent to 5 %

of GDP

■ The debt in distribution

grew fastest over 2003-11

at a CAGR of 23% in real

terms

■ It has expanded as a

share of total debt from

9% in 2003 to 36% in

2011

■ Many Discoms have

recently relied on short

term loans to meet

operating expenses

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Debt Owned by State Utilities

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Funded Loans to power sector as share of

Net worth of 13 major banks - 2010

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Drivers of Losses

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Power Purchase Efficiency Scores

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Tariff Performance and Utility Losses

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Progress on Reform Implementation

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Moving towards Efficient and Effective

Service Delivery

■ Align Stakeholder Incentive

■ Strengthen Regulatory Governance and Processes

■ Implement Key Regulatory Mandates

■ Improve Corporate Governance and State Utilities

■ Promote Responsible Lending to the sector

■ Ensure Availability of High Quality, updated data

■ Reinvigorate Planning and Coordination Mechanism

■ Decentralised Distributed Generation and Different models of

Distribution

Administrative Staff College of India, Hyderabad

Thank You

Rajkiran V. Bilolikar,

Associate Professor, Energy Area,

Administrative Staff College of India,

Bella Vista, Raj Bhavan Road,

Hyderabad - 500082

T: +91 40 6653 4390

F: +91 40 6653 4356

M: +91 9704087888

rajkiran@asci.org.in