Smart metering: A game-changer for power distribution sector, feels REC CMD
- October 3, 2023
The massive rollout of smart meters, as envisaged under the Revamped Distribution Sector Scheme (RDSS), will be a big game changer for the power distribution sector as also for electrical equipment contractors and service providers, according to Vivek Kumar Dewangan, Chairman & Managing Director, REC Ltd.
Dewangan expressed this view during his keynote address at the recently-held “IEEMA Annual Convention 2023”, in Mumbai. “It is my gut feeling that prepaid smart metering will be a key game changer in the power distribution sector. It will really change the operational and financial efficiency of discoms. Collection and billing efficiency of discoms will improve,” was how he put across his point.
The REC CMD strongly felt that IEEMA members have tremendous opportunity emanating from RDSS, which has a total outlay of Rs.3 trillion (or Rs.3 lakh crore), out of which as much as Rs.1.5 trillion has been earmarked for the rollout of 25 crore prepaid smart meters alone. It may be mentioned that IEEMA membership accounts for nearly 95 per cent of the Indian electrical equipment industry, in value terms.
“All IEEMA members will need to play a significant role in RDSS, particularly with respect to quality, reliability and safety of smart meters,” Vivek Kumar Dewangan asserted.
The electrical equipment industry stands to benefit tremendously by RDSS, not just in terms of smart meters. The remaining Rs.1.5 trillion of the RDSS outlay is broadly for loss reduction works, which will also entail goods and services of the electrical equipment industry. REC has estimated that the opportunity for the electrical equipment industry from loss reduction works (excluding smart meters) is around Rs.1.2 trillion. This would include conductors used in HT and LT works, distribution transformers, substation upgrades, SCADA-related works, etc. (See table).
Dewangan observed that nationwide rural and household electrification programmes have provided IEEMA members with a solid platform. The REC CMD recalled that India could achieve 100 per cent village electrification with the support of Central and state agencies, as well as IEEMA members. The Prime Minister, in his Independence Day speech on August 15, 2015 had pledged that India would achieve 100 per cent village electrification –implying that around 18,450 villages would need to be electrified — in the next 1,000 days, thence. The feat was achieved 13 days ahead of schedule, Dewangan reminisced in triumph.
Even with household electrification under the “Saubhagya” scheme, India achieved the mammoth target of electrifying 2.86 crore un-electrified households in just 18 months.
REC was involved as nodal agency for both the village and household electrification programmes. Extending its association further, REC is playing the same role under RDSS. Elaborating, Dewangan said that REC, as the nodal agency under RDSS, was entrusted with the scheme’s activities with 19 states and UTs, covering about 32 state-owned discoms. It may be mentioned that Power Finance Corporation Ltd (PFC) will complement REC with respect to the remaining states and UTs.
Green Energy
Dwelling further on prospects for IEEMA members, Vivek Kumar Dewangan outlined green energy as an important area. India has targeted to attain 500 GW of renewable (non fossil fuel-based) capacity by 2030, which would mean adding a massive 323 GW of capacity over the coming seven years. Apart from addition of RE power generation and storage capacity, setting up of green energy transmission corridors will be a big business opportunity for IEEMA members. Incidentally, Central Electricity Authority (CEA) has estimated the total outlay for India’s overall “energy transition” programme to be anywhere between Rs.15 trillion to Rs.20 trillion.
Challenges
Vivek Kumar Dewangan balanced his keynote speech, by also addressing, alongside the opportunities, the challenges ahead of IEEMA members. High cost of doing business – cost of finance and logistics expenses – was an important challenge, he said. Addressing precisely this factor, Dewangan assured that REC was working on some innovative financial products with a view to reducing these business costs.
Lack of testing facilities, especially for high-voltage equipment, and limited availability of CRGO steel as well as semiconductors, were some of the other impediments that could potentially slow down business growth, the REC CMD felt.
The REC CMD also observed that Indian electrical equipment manufacturers are facing low overall capacity utilization – estimated at 60 per cent to 65 per cent. Partly responsible for this was the poor recovery of dues from discoms and other state government entities. Dewangan, however, was of the view that the reform-related measures as envisaged under RDSS are beginning to have their desired effect. Strict implementation of the LPS (Late Payment Surcharge) scheme, for instance, has improved the liquidity position of discoms. “Government department dues that were to the tune of Rs.1.35 trillion in July 2021 (when RDSS was launched) have come down to Rs.0.63 trillion now. State governments have even started paying quarterly subsidy in advance,” Vivek Kumar Dewangan assessed.
Also read: REC Incorporates Project SPV For ISTS Scheme In Maharashtra
REC: At its best ever
Vivek Kumar Dewangan also highlighted that REC was likely to post its “best-ever” numbers in FY24, the ongoing fiscal year. Sanctions were likely to touch Rs.4 trillion in FY24 surpassing the yet highest-ever of Rs.2.68 trillion seen in FY23. In the first half of FY24, sanctions amounted to around Rs.1.95 trillion. With respect to disbursements, REC is likely to close FY24 with a record level of Rs.1.50 trillion, surmounting the highest-ever level of Rs.0.97 trillion seen in FY23. REC’s loan book had grown to Rs.4.35 trillion at close of FY23, up from Rs.3.85 trillion at the beginning of FY23 – a rise of around 13 per cent. As of June 30, 2023 (end of Q1 of FY24), there was already a 20 per cent growth from the end-FY23 level, the REC CMD noted. In summary, Dewangan was optimistic of REC turning out its best-ever performance in FY24, on all counts – sanctions, disbursements and loan book.
