Electricity distribution challenges and some solutions

1. Administrative Staff College of India, Hyderabad
Electricity Distribution: Challenges and
Solutions
Rajkiran V Bilolikar

2. 2Administrative Staff College of India 2
Agenda
■ Evolution of policies and Institutions
■ Achievements
■ Moving towards critical situation – Distribution Finances
■ Poor performance – operational inefficiencies
■ Some Solutions

3. 3Administrative Staff College of India 3
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

4. 4Administrative Staff College of India 4
Evolution of policies and Institutions

5. 5Administrative Staff College of India 5
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

6. 6Administrative Staff College of India 6
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

7. 7Administrative Staff College of India 7
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

8. 8Administrative Staff College of India 8
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%

9. 9Administrative Staff College of India 9
Accumulated losses by state

10. 10Administrative Staff College of India 10
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

11. 11Administrative Staff College of India 11
Debt Owned by State Utilities

12. 12Administrative Staff College of India 12
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

16. 16Administrative Staff College of India 16
Progress on Reform Implementation

17. 17Administrative Staff College of India 17
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

18. 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