Smart meter installations could add Rs. 4.5 lakh cr cumulative revenue for discoms in 7 years: CareEdge, ET EnergyWorld

The installation 25 crore smart meters could bring in about Rs 4.5 lakh crore extra for power distribution companies (Discoms) over seven years, from FY24 to FY31, says a recent CareEdge Ratings study. The cost to set up these 25 crore smart meters is about Rs 1.1 lakh crore, with a need for loans of around Rs 76,000 crore.

Aggregate Technical & Commercial (AT&C) losses for power distribution companies (Discoms) have dropped from 20.73 per cent in FY20 to 15.4 per cent in FY23 because of better collection methods. CareEdge Ratings anticipates a gradual improvement in billing efficiency by installing more smart meters, which could reduce aggregate AT&C losses to the low teens within the next 3-4 years.

The government’s new Revamped Distribution Sector Scheme (RDSS) has allocated Rs 3.03 lakh crore, including gross budgetary support (GBS) of Rs 97,000 crore set aside from FY22 to FY26, helping reduce losses in the power distribution sector.

The Ministry of power has approved Rs 1.2 lakh crore to reduce losses and Rs 1.3 lakh crore for smart metering as of December 31, 2023, including the GBS of about Rs 24,000 crore for smart metering.

However, factors such as timely tariff adjustments and subsidy collections will remain critical to ensuring Discoms achieve self-sufficiency.

Sabyasachi Majumdar, Senior Director at CareEdge Ratings, commented, “The government’s support is driving a rapid rollout, but implementation progress has been somewhat slow in recent years. The standard bidding document (SBD) prepared by NSGM for AMISP aims to balance interests between AMISP and Discoms, ensuring a level playing field nationwide. As these projects progress, it will be crucial to monitor the mitigation of counterparty credit risk for AMISP.”

India can make about 7 crore smart meters each year, dominated by a few major players operating at 65 per cent-70 per cent capacity utilization but might reach only 40%-50% of the goal by December 2025.

Additionally, the structure of the Direct Debit Facility (DDF), covering counterparty credit risk, along with upfront cash construction support from Discoms, will help mitigate leverage, funding risks, and attract investors to the smart metering business.

  • Published On Mar 29, 2024 at 03:43 PM IST

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