Discoms could have additional revenue potential of Rs.4.5 trillion: Study
- March 28, 2024
A study by CareEdge Ratings estimates that advance metering infrastructure is likely to provide additional cumulative revenue potential of around Rs. 4.5 lakh crore to discoms, in the next seven years, up to FY31.
The study notes that the envisaged investment outlay for the installation of 25 crore smart meters, under RDSS, is around Rs. 1.1 lakh crore necessitating debt of Rs. 76,000 crore. The returns to discoms would be in the form of reduced losses and improved billing efficiency by the installation of meters.
Policy push
There have been multiple schemes from the Ministry of Power to promote installation of smart meters such as the DeenDayal Upadhyay Gram Jyoti Yojana and Integrated Power Development Scheme. However, with the introduction of the Revamped Distribution Sector Scheme (RDSS) at an outlay of Rs.3.03 lakh crore including gross budgetary support (GBS) of Rs 97,000 crore during the FY22-FY26 period, the power distribution sector got a major push in terms of reduction of overall losses, the study observes.
Smart metering forms an integral part of RDSS. As on December 31, 2023, the Union power ministry had approved Rs.1.2 lakh crore for loss reduction and Rs.1.3 lakh crore towards smart metering. GBS for smart metering is estimated at Rs. 24,000 crore.
Discom losses
On an aggregate basis, the Aggregate Technical & Commercial (AT&C) loss of power distribution companies (discoms) has steadily declined from 20.73 per cent in FY20 to 16.4 per cent in FY22 and further to 15.4 per cent in FY23. This is largely aided by an improvement in collection efficiency.
CareEdge Ratings expects a gradual uptick in billing efficiency led by increased rollout of meter installations, which in turn shall bring down the aggregate AT&C loss to low teens in 3-4 years. However, other key components like timely tariff hikes as well as subsidy collections will remain crucial to ensure that discoms become self-sufficient.
Featured photograph (source: IntelliSmart Infrastructure) is for representation only.
