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India plans $35 bn reforms over 5 yrs to revive struggling power retailers

India is planning another wave of reforms aimed at turning around its struggling power retailers.

The initiative is still under consideration, a power ministry spokeswoman said Tuesday, declining to provide details. The reforms could cost as much as Rs 2.5 trillion ($35 billion) over five years, according to people with knowledge of the issue.

The measures would focus on infrastructure and technology upgrades of the ailing utilities to make them more efficient and reduce financial losses, according to the people, who asked not to be identified as the information isn’t public. The efforts could include central government grants of as much as Rs 1 trillion to states that meet targets set by New Delhi, they said.

The plan could include the installation of about 250 million prepaid smart meters, which are expected to boost revenue collection.Other measures include systems to better monitor and control networks — known as supervisory control and data acquisition systems — separating grids for farmers and residential users, and replacing overhead cables with special insulated wires to prevent theft.

Electricity distributors are the weakest link in the country’s power supply chain, losing almost one-fifth of their revenue because of technical and commercial reasons, including loss of power supplies through theft and poor transmission infrastructure or inefficient billing and collection. Reviving these utilities is key to ensuring reliable power supplies and improving the financial health of generators.

The investment in smart meters is expected to become part of the operating expenses of the retailers and will be funded using the efficiency gains they derive from the upgrade, according to the people. The power ministry is working with distribution companies on models for other initiatives, the officials said, with any payments from the federal government linked to meeting targets.

The new measures would follow an unsuccessful plan unveiled in 2015 to make retailers profitable by March 2019.

That effort included reducing revenue lost from theft and poor billing to an average of 15%. While such losses did decline, they were still at about 18% at the end of the year to March 2019, the power ministry said in a report in October. Combined net income losses at distributors that signed up for the reform plan in the same year widened to about Rs 280.4 billion, an 85% year-on-year increase, according to the report.

Source: Business Standard