The State of DISCOMS and their Issues

The crisis of “DISCOMS” is one of the major challenges faced by the government in recent times. The financial crunch and irregularities in DISCOMS are long-drawn problems. The government took steps to solve the problem of this sector. This is one of the major topics which has a great chance of coming in upcoming exams like UPSC, SSC, State PSC, and others. 

DISCOMS :

• Generation, transmission, and distribution are the three main processes in the energy sector.
  
• Electricity distribution is done by a distribution company (DISCOM) that connects generators to homes. These are the interfaces between providers and consumers.
  
• In other words, DISCOMs (distribution companies) are utility companies that typically purchase power from generators and sell it to consumers.
  
• Under the Indian Constitution, electricity is a competing issue and states are responsible for the distribution and supply of electricity to rural and urban consumers. DISCOM is therefore primarily owned by state governments. 
  
• Private DISCOM also operates in India but is limited to a few cities such as Delhi and Mumbai.
  
• For many years, most of India’s energy utilities were in financial trouble.
  

Major Challenges Faced By DISCOMS :

• Power losses: 21.7% high AT&C (technical and commercial aggregate) losses due to poor or inadequate infrastructure, theft, and unissued or unpaid bills. 
  AT&C losses reflect losses due to energy losses during transmission and distribution (due to technical reasons), theft and billing inefficiencies, and commercial losses such as collection inefficiencies, and payment delays. 
  
• Financial losses: DISCOM has not increased its fees to match the increased costs. This is because most of them are owned by state governments and democratically elected governments, to make electricity affordable for their citizens, face populist pressure not to raise prices.  because I succumbed to it, In addition, there are often delays in determining tariffs. For central power plants, where more than one state is involved, the Central Electricity Regulatory Commission sets the rates. Rates for in-state power plants are set by each state’s Power Regulatory Commission.
  
• Poor cash flow: Distribution companies collect payments from consumers for energy supplies (purchased by generators) to provide the cash flow needed to operate the generation and transmission sectors. Discom is unable to make timely payments for its energy purchases from generators due to the continued lack of cash income, often due to delayed consumer payments. This delinquency limits your ability to pay on time and forces you to incur operational liabilities with power and transmission companies.
  
• Missing measurements: The various levels of the distribution chain (feeders, distribution transformers (DT), and consumers) have not been fully measured. As a result, it becomes difficult to isolate and identify areas of loss and take corrective action.
  
• Competing with renewable energy: Combined with existing long-term power purchase agreements (PPAs) with mostly coal-based power generation, the price of electricity has dropped to Rs 2.90 per unit (the average power cost per unit for utilities is Rs 6). Intensified projects have become more financially rigid, leading to financial losses for discoms.
  
• Impact of COVID-19: The pandemic has destroyed incoming utility cash flows. Lockdowns disproportionately impacted commercial and industrial segment sales. However, most of DisCom’s cost structure is bound by a PPA that mandates the payment of capital costs.
  
• The rise of informal credit: Over the years, DisComs has delayed upstream payments (not just producers, but others as well).
  
• Ambitious projects without sufficient support: Programs that power everyone in the center adds to the inefficiencies. This is because the cost structure must be reviewed to enable more advanced electrification. Similarly, the distribution network (transformers, cables, etc.) also needs to be expanded. Without such measures, losses must increase.
  
• Profitability: The gap between Discoms’ cost (Average Cost of Supply) and revenue (Average Realized Revenue) is currently expected to close at Rs.0.49 per unit due to the lack of regular and reasonable price increases. According to Niti Aayog’s August 2021 report, most power discoms suffer losses every year, with total losses for fiscal 2021 estimated at 90,000 kroner. Due to these accumulated losses, DISCOM was unable to pay the generators on time.
  

Important Schemes to support DISCOMS

The government is taking some steps to solve the DISCOM problem.

UDAY scheme:

• Launched in November 2015, Ujjwal DISCOM Assurance Yojana (UDAY) is designed to improve the financial health of DISCOM.
  
• The state government assumed 75% of his DISCOM debt and issued low-interest bonds to pay off the remaining debt.
  
• In return, DISCOM was given a target date (2017-19) to meet efficiency parameters such as reducing power losses due to transmission, theft, and erroneous measurements. 
  

Reform-Bound Results-Based Distribution System (RLRBSD):

• In the 2021-22 budget, the union government announced the launch of a “reform-based and results-oriented” program to improve the financial health and operational efficiency of nightclubs. 
  
• The program will reduce AT&C losses from 21-22% to 12-15% by 2025-26.
  
• Discom’s operational efficiency will be improved through the modernization of smart meters and distribution infrastructure, including agricultural feeder segregation and system enhancements. 
  

Liquidity scheme:

• In support of these DISCOMs, the Center announced the Liquidity Injection Program (Aatmanirbhar Bharat Abhiyan) in May 2020 and authorized a loan of Rs.1,35,497 crore.  As of 31 December 2021, a total of Rs.103 crore has been paid.
  

Measures to be taken :

• Improved AT&C loss: Many nightclubs need to improve billing efficiency through better and smarter metering.
  
• Streamline subsidies and eliminate the need to give free electricity to those who do not deserve such assistance.
  
• Privatization of DISCOMS: Only 10% of the population in India is served by private delivery licensees. Good corporate governance and increased private participation in sales, therefore, open up the potential for increased efficiency.
  This is an experiment that has yielded positive results in many cities such as Delhi, Mumbai, Kolkata, and Ahmedabad. Before privatization in 2002, AT&C’s losses in the provincial capital amounted to 53%, and the government-subsidized Discom 12,000 krone each year. Losses declined after privatization and today Delhi is one of his DISCOMs in the country although he has the lowest AT&C losses of just 8%.
  
• Regulatory reform: State governments should promote the autonomy, authority, and transparency of the State Electricity Regulatory Commission (SERC). Depoliticization of DISCOM is essential.
  
• Integrated reform of renewable energy: DISCOM must be prepared to respond to the increase in renewable energy (RE) from both producers and consumers. 
  
• Addressing Agricultural Consumer Concerns: As part of the PM-KUSUM program, a large number of farmers have been able to obtain cost-effective power during the day by installing megawatt-scale solar power systems that provide eight hours of high-quality power directly to special agricultural feeders. can be supplied.  This meets farmers’ demand for a reliable supply, almost halving Discom’s cost and need for subsidies. RDSS( Revamped Distribution Sector Scheme) is prioritizing investments and subsidies in specialized agricultural feeders to accelerate feeder solarization. This grant support helps ensure reliable supply and reduces the need for subsidies.
  
• Further impulses: More liquidity needs to be injected to prevent the entire power chain from collapsing.