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Decoding India’s T&D losses

Mrinalini Prasad ,  Monday, November 26, 2012, 11:16 Hrs  [IST]

cover storyThe transmission & distribution sector has time and again proved to be the weakest link in the country's power value chain. India's aggregate technical and commercial losses in the power sector have touched nearly 30 per cent, making a woeful comparison with global standards. In this special story, Mrinalini Prasad explains the legacy reasons for high T&D losses and the steps that are being taken to bring them down to acceptable levels.

Power remains one of the major issues in India. The reforms in the sector have been going on for several decades. However, the focus has largely been on the generation side. As a result, while the sector has taken massive strides with increased capacity additions in past years, bridging of demand and supply gap still remains a concern. Capacity addition programs have successively increased. However, there is still a lag in the plugging of transmission and distribution losses. The large part of energy already being generated is lost in transmission and distribution process. Further, investment in the new projects is also jeopardized due to failure of the government to bring down these losses to an optimum level. At present, average annual AT&C losses are estimated to be around 28 per cent.

T&D losses are the biggest challenge in the power sector. Technical and non-technical losses together have contributed to high level of T&D losses in the country. Inefficient use of electricity, power theft, unauthorized connections, political interference and lack of consumer awareness are the main causes of T&D losses.

Distribution sector is a vital link in the power sector value chain as it completes the revenue cycle. Unfortunately, this is the weakest link in the power sector in India. This not only has had an effect on the financial health of the distribution utilities, but has also widened the demand-supply gap further.

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What are T&D losses?

T&D losses are the power losses that are caused in the process of transmission of electricity from the generation end to the consumers. A large part of the losses are technical in nature, however, faulty meters and power thefts have also resulted in commercial losses. Together, the losses have been termed as Aggregate Technical and Commercial (AT&C) losses. AT&C losses provide a realistic picture of the actual energy loss at the distribution end.

The technical losses depend on the type of conductors used, transformer capacity, and other equipments used for transmission and distribution of electricity. These losses are intrinsic to power transmission system and all the countries report some percentage of technical losses. The Commercial losses are caused due to illegal consumption of electricity. These are caused due to discrepancy in meter reading, faulty meters, power theft and collection inefficiency.

T&D losses in India are among the highest in the world. Inadequate investment in the transmission and distribution network is one of the main reasons for high T&D losses in the country. From 19.8 per cent in 1992-93, the losses rose to 33.98 per cent in 2002. In 2009, average AT&C losses in the country were estimated to be 27.15 per cent. In southern region, the average AT&C losses were 19.49 per cent whereas northern region reported losses at an average of 36.44 per cent. AT&C losses for North-Eastern region are the highest. In 2009-10, losses reported by the North Eastern region were 36.44 per cent against the national average of 27.15 per cent.

Though the current average of AT&C losses in the country is 28 per cent, there is a wide variation in the losses reported by different states. In some states, the losses are as high as 60 per cent, while some others have been able to bring down these losses considerably. In terms of capacity, 25 per cent of T&D losses would account for about 50,000 mw capacity, with the total energy generation in India reported to be 2,07,006 mw.

T&D losses are the main cause of mounting financial losses on the state distribution utilities. According to a Planning Commission report, the reported AT&C loss of Rs.28,853 crore for 20 major states in the X Plan is an underestimate. Actual AT&C losses are estimated to exceed Rs.40,000 crore. Increase in investment in the generation sector will further increase the financial losses if the T&D losses are not checked.

The main reason for the high rate of T&D losses in India is insufficient investment made in the transmission and distribution sector. The investments have been particularly low in sub-transmission and distribution. While the investment in generation has increased steadily, transmission has not kept up with it. This led to mismatch in the generation and supporting transmission system. Without the strengthening of the existing grids and development of new systems, the load on the transmission systems have increased resulting in increased T&D losses.

Power theft is one of the major causes of high T&D losses in India. Inefficiency in the power distribution system has led to failure in checking of power theft and this leakage continues to plague the sector. According to the Economic Survey of 2006-07, loss due to theft and pilferage is estimated to be about Rs.20,000 crore annually.

smart meterAs per the provisions of the Electricity Act, 2003, Special Courts to deal exclusively with cases of electricity theft have been set up in 23 states except Bihar, Goa, Jharkhand, Kerala, Arunachal Pradesh and Mizoram. In addition to this, special police stations have also been set up in 11 states viz. Andhra Pradesh, Delhi, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Rajasthan, West Bengal, Himachal Pradesh and Tripura. Considering the High AT&C losses in various states, it is proposed that Special Courts may be set up in all districts together with police stations.

Further, improper load management and poor quality of distribution transformers used are also responsible for high T&D losses in the country. About 75 per cent of the total technical loss and almost entire commercial loss occurs at the distribution stage.

The Accelerated Power Development & Reforms Programme (APDRP) was launched in March 2003 as additional central assistance to states for strengthening and upgrading of sub-transmission and distribution systems of high-density load centres like towns and industrial areas with main objectives of reduction in AT&C and commercial losses; improve quality and reliability of supply of power. Under this, states were given investment for financing distribution sector projects and it also provided incentives for the improvement in performance. Total 574 projects at the cost of Rs.17,329 crore were sanctioned under APDRP in the X Plan period.

The government had targeted to bring down the AT&C losses to 15 per cent by the end of X Plan, from the 33 per cent in the beginning of the Plan. In the X Plan, nine states showed cash loss reduction of Rs.5,255 crore against their loss in 2001-02 under the APDRP. However, the actual AT&C losses of most of the state power utilities remained high and this made them financially sick. The losses continued to be around 27 per cent by the end of the X plan.

The APDRP succeeded to an extent. Under the program, the metering status in the country improved considerably. The 11kV feeder metering reached 98 per cent in 2008 from 81 per cent in 2002. Consumer meeting was reported to be 89 per cent. Delhi, Haryana and Kerala achieved 100 per cent consumer metering. However its under-achievement in reducing AT&C losses and reinstating financial viability of the distribution companies, made it necessary for the government to reintroduce the programme in the 12th Plan period.

Government continued the APDRP in the XI Plan period as Restructured APDRP. Certain terms and conditions of the APDRP scheme were revised and the scheme was launched in 2008. The focus of the R-APDRP scheme was to establish base line data, fix accountability, strengthen and upgrade sub-transmission network and reduce AT&C losses up to 15 per cent. Projects under the scheme were proposed to be taken up under two parts - Part A and Part B. Projects under Part A included base line establishment and IT applications for energy auditing. The projects under Part B included strengthening of sub-transmission and distribution projects. The review of R-APDRP is currently under progress and the final performance report is yet to come out.

The financial health of distribution utilities in the country is a matter of concern. The financial losses have shown increase in the last few years. While the utilities should make serious efforts to reduce the AT&C there should be adequate tariff to recover the cost of supply. If the present trend continues, projected losses in the year 2014-15 will be Rs.1,16,089 crore as per the study conducted by MERCADOS for the 13th Finance Commission.

Cumulative losses of distribution utilities as on March 31, 2009 are estimated to be about Rs.75,000 crore. From the PFC Report "Performance of State Power Utilities", data for the year 2008-09 in respect of 40 utilities of states that have unbundled their SEBs has been analyzed. On subsidyreceived basis, 11 utilities-APCPDCL, BYPL, NDPL, NESCO, WESCO, DGVCL, MGVCL, PGVCL, UGVCL, CSPDCL & WBSEDCL-are in profit and 29 utilities are in loss. Net worth of only 18 utilities was positive in 2008-09. This included four discoms of AP, LAEDCL in Assam, BYPL & NDPL in Delhi, all 4 discoms in Gujarat, MESCOM in Karnataka, MSEDCL in Maharashtra, all 3 discoms of Rajasthan, CSPDCL in Chhattisgarh and WBSEDCL in West Bengal. Totally, 22 utilities have shown negative net worth.

Privatization and Distribution Franchisee models have been attempted in some states. Delhi and Orissa experimented with privatization of distribution utilities. With the initiation of power sector reforms, Orissa was the first to segregate electricity distribution business from generation and transmission and formed four distribution companies. It did not work well due to lack of transitory support, tariff inadequacy, and lack of implementation of theft-control measures.

high voltage transmission linesOn the other hand, privatization of distribution business in Delhi reflects success as it took adequate care about the shortcomings of the Orissa model. Bhiwandi in Maharashtra is an example of successful distribution franchisee experiment. Torrent Power was selected as the distribution franchisee for Bhiwandi in January 2007. Torrent Power has been successful in bringing down the AT&C losses in the region from 54.64 per cent to 20.20 per cent. The metering in the region has improved from 23 per cent to 100 per cent. After Bhiwandi experiment, several other towns including Nagpur, Aurangabad and Jalgaon have also been awarded to distribution franchisees. Many other distribution companies are considering appointing distribution franchisees.

Smart grids are transmission network that utilize information and communication technologies to make the transmission infrastructure more efficient and resilient. It enables developers and operators to carry out real time monitoring and controlling the systems. This helps in reducing AT&C losses, peak load management, outage management, power quality management and also channeling power from renewable energy resources.

Management of power systems is becoming more complex with the increase in renewable power plants in the country. Besides, rapid urbanization also demands quality and reliable power supply. Apart from this, need for reduction of AT&C losses, viability of distribution companies and sustainability concerns have paved way for the development of smart grids in the country.

Power ministry received a number of proposals for development of smart grids in the country. After detailed evaluation, the ministry selected 14 proposals. These pilot projects have been estimated at a total cost of Rs.400 crore. The Central government will fund up to Rs.200 crore under the R-APDRP for the proposed projects and the rest will be funded by the respective state governments. The projects will focus on reducing AT&C losses and also incorporation of renewable energy in the system. The projects are expected to be completed by 2013-14.

Smart Grids require implementation of advanced technologies in monitoring, measurements, control, automation, communication, IT for energy auditing and metering among other things. Development of technologies in these fields will help in development of efficient smart grid projects.

Smart meters are an important part of smart grid implementation as they are vital in ensuring greater efficiency, reduction of AT&C losses and also theft reduction. They have several advantages over the traditional meters. Smart meters enable real time communication, information storage and energy loss calculation. It also consists of anti-tampering mechanism.

Automatic Meter Reading (AMR) is often referred to as Smart Metering. AMR notes the meter readings electronically eliminating any chances of errors that are associated with manual data recording. AMR is beneficial to utilities as well as consumers. By implementing AMRs, the utilities save the time and resources that are required to visit the site and record meters manually. It will also ensure that the meter reading is accurate and hence the cash flow to the utility will be improved. Besides, the meter reading and data recording process will be faster. Also, the utilities will be able to identify any tampering with the meters immediately. The defects in the meters will also be identified soon.

The transmission and distribution losses in the developed countries are in the range of 4 to 8 per cent. Countries in Europe and United States of America have T&D losses of about 6 to 8 per cent. Japan and Germany have reported losses of 4 per cent. Russia, on the other hand, has reported losses of around 12 per cent. India compares badly to the T&D loss average of the developed world. Even China has been able to check its T&D losses with just 7 per cent loss reported.

Electricity is a concurrent subject and hence it is pertinent that the Centre and State work together towards bringing down the AT&C losses in the country. The government at both levels should take steps to curtail the losses and in turn mounting financial losses of the distribution companies. Further, larger investment in the sector is required to bring down the losses and also improve the quality of power supply. High losses areas need to be identified and appropriate steps must be taken to control losses in the region.

While efforts from the Central and State governments are required, distribution companies also need to draw a road map to reduce these losses. A result-oriented time bound strategy is should be adopted by the utilities. Further, automatic accounting and energy auditing will be an important step by distribution companies in checking their AT&C losses and improving their cash flow.

The 18th Electric Power Survey Committee, headed by Central Electricity Authority Chairman has mentioned that T&D losses in the country are proposed to be brought down to around 17 per cent by the end of XII Plan and further to about 14 per cent by the end of XIII Plan. Though the trend in the sector has not been very impressive, it may be possible to come close to the target if all-out efforts are made by power utilities and state governments.

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State 2007-08 2008-09 2009-10 2010-11 2011-12
Andhra Pradesh 20.3 19.2 18.1 16.1 15.3
Arunachal Pradesh 43.7 48.0 39.1 35.6 34.5
Assam 28.0 29.6 34.8 29.9 27.7
Bihar 39.1 38.0 38.3 37.0 35.0
Chhattisgarh 31.0 28.6 38.7 34.7 32.7
Goa 16.7 21.0 16.6 17.4 17.6
Gujarat 23.8 22.8 24.5 22.7 22.3
Haryana 28.1 25.7 26.8 24.4 22.7
Himachal Pradesh 13.5 13.2 14.7 14.6 14.5
Jammu & Kashmir 61.9 61.3 63.0 60.0 58.5
Jharkhand 42.3 43.0 38.5 33.5 40.8
Karnataka 25.3 23.3 21.4 20.1 19.6
Kerala 19.9 19.9 19.2 19.1 18.6
Madhya Pradesh 40.1 39.0 35.6 34.1 32.6
Maharashtra 29.1 26.5 25.2 22.5 21.6
Manipur 48.4 51.1 45.8 43.3 38.0
Meghalaya 33.4 31.2 34.0 30.0 28.4
Mizoram 24.9 32.6 37.0 35.4 34.3
Nagaland 36.4 31.0 36.5 30.8 28.1
Puducherry 13.8 13.7 13.5 13.5 13.5
Punjab 21.5 18.5 19.7 17.8 16.8
Rajasthan 35.5 31.9 29.9 27.6 24.8
Sikkim 22.3 34.0 40.6 42.4 38.8
Tamil Nadu 18.0 18.0 18.0 18.0 17.0
Tripura 23.4 24.1 24.7 20.9 20.1
Uttar Pradesh 32.6 28.6 32.3 28.9 24.4
Uttarakhand 29.7 28.0 24.5 22.5 20.5
West Bengal 24.3 23.3 23.8 23.5 22.3
Source: Planning Commission
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