Revamped Distribution Scheme – Another Effort to Reform the Indian Electricity Distribution Sector

In earlier blog, we discussed in detail a major problem plaguing the electricity sector in India – ensuring financial viability of Distribution Utilities (DISCOMs). We noted how this objective has long been a policy focus for successive governments and discussed a new Central Government scheme aimed at ensuring financial viability of DISCOMs; a scheme which was announced in the Union Budget for FY 2021-22. At the time, the draft guidelines in the scheme were to be discussed with State Governments and State-owned DISCOMs and subsequently made operational.

Recently, the Ministry of Power notified the final guidelines of the scheme. In this blog, we will discuss the salient features of the final version of the scheme, as announced by the Ministry vide its Order dated July 20, 2021.

Objective of the Scheme

As noted in the earlier blog on this subject, the objective of this scheme is to “improve the quality and reliability of power supply to consumers through a financially sustainable and operationally efficient distribution sector.” In terms of targets, the scheme aims to reduce AT&C losses at pan-India level to 12-15% and ACS-ARR gap to zero by FY 2024-2025. Ongoing schemes such as IPDS, DDUGJY and PMDP-2015 have been subsumed under this revamped scheme.

Scope of the Scheme

The scope of the scheme has been retained in two parts: Part – A for financial support for upgradation of the DISCOM infrastructure and prepaid smart metering & system metering ; Part -B for training and capacity building. The Government anticipates considerable price reduction resulting from large-scale deployment of pre-paid smart meters under Part -A of the scheme.

Part – A: Upgradation of DISCOM Infrastructure, Prepaid Metering & System Metering

The indicative list of works under Part -A are given below:

  • Smart Meters

Sr.noItemQuantityGross Budgetary Support (GBS)
1.Prepaid smart meters at consumer, DT and feeder level25 Crore15% / 22.5% (limited upto Rs. 900 or Rs. 1350 per meter for consumer metering)
2.Other costsLumpsum100%

  • Infrastructure Creation
Sr.noItem Quantity Estimated
1.Segregation of agricultural feeders10,000 Nos
2.Replacement of existing LT overhead bare conductor lines with AB cable/HVDS in high theft prone areas4,00,000 Kms
3.Distribution automation in urban areas
4.SCADA/DMS in cities with population > 2.75 Lakh including OPEX for 2 years100 Nos
5.SCADA (Real time supervision & controllability of substations) including OPEX for 2 years3875 Nos
6.Funding for DISCOM infrastructure such as HVDS, IT and OT, feeders, etcAs required

The final scheme contains details of support from Central Government for installation of smart meters. As per the revised scheme, the Central Government would provide funding for installing smart meters at 15% of the cost of consumer meter (capped at Rs. 900 per consumer meter) and 22.5% of the cost of the consumer meter (capped at Rs. 1350 per consumer meter) for special category states. Central Government would also provide capped incentives for installation of smart meters.

Smart meters are to be installed under TOTEX (CAPEX plus OPEX) mode in the first phase in: a) electricity divisions of 500 AMRUT cities with AT&C losses >15%, b) UTs, c) MSMEs and all other industrial and commercial consumers, iv) all Government offices and v) other areas with high losses. Smart meters need not be installed in the case of agricultural consumers.

Analytics of Data

Furthermore, advanced ICT like Artificial Intelligence, Machine Learning and Blockchain technology would be leveraged to analyse the data through IT/OT devices to prepare actionable MIS reports. This would enable DISCOMs to take decisions on varied matters ranging from loss reduction, demand forecasting, asset management, TOD tariff, renewable energy integration and other predictive analysis. Budgetary support under the scheme would be provided so that applications related to such advanced ICT can be developed which would in turn lead to promotion of development of start-ups in the electricity distribution sector.

Part – B: Training & Capacity Building

The Scheme includes the following works for training & capacity building: a) augmentation of Smart Grid Knowledge Centre at PGCIL, Manesar, a) training/capacity building including awards and incentives, c) reforms, d) nodal agency fee, etc . The funding under this head would be entirely through budgetary support from Central/State Government(s).

Eligible DISCOMs and Nodal Agency

All State-owned DISCOMS and State/UT/Power Departments are eligible for financial assistance under this scheme. PFC and REC are retained as Nodal Agencies under this scheme.

Action Plan

As envisaged in the draft scheme, each DISCOM would have to prepare an action plan for strengthening the distribution system. While DISCOMs have the flexibility to draw their own plans, a loss making DISCOM would not have access to funding in the absence of an action plan. Such loss making DISCOMs would have to get the State Government’s approval for the same.

The action plan is to include Work Plan for loss reduction and system strengthening. Works required for AT&C loss reduction will be given priority. Indicative list includes:

  • Replacement of conductors
  • Additional HT lines to improve quality of supply
  • Segregation of agricultural feeders
  • Aerial Bunched Conductors in high loss areas
  • SCADA in all urban areas and DMS in 100 urban centres with population more than 2.75 Lakh
  • Prepaid/Smart metering systems
  • New feeders, capacitors, etc
  • IT/OT enabling works
  • Prepaid metering for all Government Departments
  • Transformer/feeder metering under OPEX mode

Results Evaluation Framework

The provision of a Results Evaluation Framework has been retained in the final scheme. There continues to be a certain set of pre-qualifying criteria that a DISCOM needs to fulfil to be eligible for funding for infrastructure upgradation under Part -A. The Results Evaluation Matrix is clearly delineated; with the scheme specifying individual parameters that would constitute each of the 4 criteria in the matrix.


With the notification of the final scheme, details of reform measures proposed by the Central Government are very clear. A major change from earlier schemes is that the scheme goes beyond measuring targets pertaining to AT&C losses and ACS-ARR gap. While these are important parameters, inclusion of parameters such as DISCOM dues to generators not only addresses the financial viability of DISCOMs, it also provides generators a framework to recover long pending dues from DISCOMs. As on June 2021, DISCOMs owe Rs. 91, 350 Crore to central sector generators, IPPs and renewable energy generators.
The scheme has also noted the need for advanced technology such as Artificial Intelligence, Machine Learning, etc., to perform detailed predictive analytics on data from IT/OT devices including prepaid smart meters. This would have use cases in varied areas ranging from loss reduction, demand forecasting, renewable energy integration, energy efficiency, etc.

We at SCOPE are particularly excited at this prospect as our partner OrxaGrid is an award-winning start-up specializing in predictive analytics for the electricity grid of the 21st century and beyond. We have already seen how OrxaGrid technology enables a sustainable energy future, accurately predict voltage fluctuations, optimize transformer efficiency, and finally, accurately estimate the optimal size of Solar PV installations. To know more about what OrxaGrid can do for you, please write to us at or visit

In conclusion, the revamped DISCOM scheme is a major effort made towards addressing a major problem plaguing the electricity sector. We at SCOPE once again congratulate the Central Government on this much needed initiative and hope for a speedy, smooth implementation of this ambitious scheme.

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