To help state-run power distribution companies (discoms) to pare their losses, the Union power ministry has issued an advisory to all Central government ministries to direct organisations under their control to switch over to prepaid smart meters on priority. The development closely follows the Cabinet approving the Rs 3 lakh crore discom-reform scheme, which includes the agenda of installing 25 crore smart prepaid meters across the country.
As FE recently reported, a sum of Rs 22,500 crore has been earmarked under the scheme as Central government grant for installing smart prepaid meters.
Mounting electricity dues of government departments, including the Central and state governments, cause cash flow distress in discoms. Outstanding government department dues were as high as Rs 48,664 crore at the end of FY21, which is around 9% of the annual turnover of the power sector.
As many as 25.2 lakh smart meters have already been installed across the country, and around 81 lakh more are at different stages of implementation. Prepaid electricity meters are seen to be a major tool to aid the efforts of discoms to cut pilferage and reduced the gap between the cost of power supply and revenue realised by ensuring timely payments from consumers.
A recent report released by NITI Aayog said losses of discoms are estimated to have surged to Rs 90,000 crore in FY21. Union power minister RK Singh recently said discoms’ losses were down 38% on year at Rs 38,000 crore in FY20.
Analysts at Crisil said discom losses will be 40% higher in FY22 than in FY20, because revenues will remain constrained as demand from high-paying commercial and industrial consumers has been lower than that during pre-pandemic period, while tariff hikes have been inadequate. Industrial and consumer segments traditionally contribute more than 70% of discoms’ revenue, but use about 50% of the overall electricity supplied.
“Prepaid smart metering in all government departments would not only go a long way in ensuring the commitment of the government in bringing discoms back on the path of financial sustainability, promotion of energy efficiency but would also serve as a model for emulation by states for defining similar such mechanisms that support prepayment of the electricity dues by their own departments,” a power ministry statement said.