Power ministry proposes bringing distribution network under state transmission utilities

The Union power ministry has proposed to bring all 33 kV systems, currently maintained by state distribution companies (discoms), under state transmission utilities (STUs) with an aim to improve the power distribution system.

It has advised state governments to form joint venture companies with Powergrid if they are unable to provide financial assistance to STUs to upgrade and modernise the system.

In a September 1 letter to all state governments and union territories, the ministry has said state discoms should hand over the 33 kV system to the STUs for better planning, loss reduction and increased supply reliability in a phased manner.

ln the first phase, incremental assets in the 33 kV network and existing overloaded assets can be handed over to STUs, and the respective state governments will have to provide financial assistance to the STUs to upgrade and modernise their 33 kV assets.

If the state governments are not in a position to do so, the STU can form a joint venture with Powergrid on a 50-50 equity basis. Powergrid has already been advised by the power ministry to form joint ventures with STUs wherever the state government approaches it.

The letter, which has been accessed by FE, said the ‘sub-transmission system’, which is critical for reliability of power supply system, is beset with problems of higher losses and inefficient performance. The ministry had constituted a committee under the chairmanship of CMD, Powergrid, with representatives from the Central Electricity Authority, STUs of Haryana, Maharashtra and Odisha, and Central Transmission Utility of India, to suggest measures to reduce losses in the sub-transmission system, ensure reliability and efficient performance and promote investment.

According to the letter, the committee, after collecting information from 25 STUs and 30 discoms on the performance of the utilities at different voltage levels, observed that losses at the 33 kV level are about 4.8%, while at the 66 kV-220 kV level, they are only 1.72-2.39%. There is considerable scope for improvement of the 33 kV system’s performance, it said.

‘Based on the findings, the committee has recommended that … the 33 kV system must be bought under State Transmission Utility,’ the letter said. Since the distribution system is an end-consumer-facing entity, the focus of the discoms is generally on quick restoration of supply in case of any fault or granting connection to new consumers, rather than on long-term planning and expansion of the distribution network, it said.

‘Due to the poor financial health of discoms, the coordinated planning and expansion of 33kV system, including adoption of new technologies and the overall operation and maintenance levels, is not comparable to that at 66 kV and above voltage levels … by better upkeep of the 33kv system, an incremental revenue of `7,865 crore per annum could be achieved…,’ the letter said.

It said if losses can be reduced from 4% to 3%, 8.99 billion unit per annum energy could be saved, and incremental revenue to states would be `4,495 crore per annum (assuming rate of electricity at `5 per unit). If the availability of 33 kV system can improve by 0.7S%, then an additional 6.74 billion unit per annum would be available to end consumers, which could bring an additional revenue of `3,370 crore per annum (assuming rate of electricity at `5 per unit), it said.

The All India Power Engineers Federation (AIPEF) has strongly opposed the plan and termed it an encroachment by the central government on a state subject. ‘The move is an attempt of the central government to control electricity in states and is aimed at finishing government discoms to facilitate private suppliers. Advising state governments to form JVs with Powergrid will be the beginning of the end of STUs as well State discoms,’ Shailendra Dubey, chairman of AIPEF, said.

He said the Electricity (Amendment) Bill, 2021, has a provision to delicense the distribution system and allow multiple private companies to supply electricity in any area using the network of government discoms. ‘After the formation of a JV company, this network will also be taken away from the state discoms,’ he said.