[op-ed snap] Improving state finances by reducing power losses


Mains Paper 3:Economy| Infrastructure: Energy, Ports, Roads, Airports, Railways, etc.

From UPSC perspective, the following things are important:

Prelims level: India Consensus Project, Copenhagen Consensus

Mains level:  Structural issues in the power sector



  1. Numbers indicate that agricultural users across the country pay only one-fourth the price for the power they consume compared to other users.
  2. India’s total energy losses came to 24% in 2015-16, significantly more than international norms.
  3. This, however, is an improvement on 2003-04 when the losses were 38%. Progress was made because of national- and state-level reforms.

Shortcomings of the state discoms

  1. Inadequate and poor-quality power supply means frequent interruptions, poor voltage levels, and dissatisfied consumers across much of the country.
  2. Other losses includes those due to energy dissipated in conductors, transformers and other equipment, along with pilferage by those who bypass meters, and losses from failure to recover the amount billed to consumers,.

India Consensus project

  1. It is commissioned by Tata Trusts and the Copenhagen Consensus for the India Consensus project to look at state-level solutions for Andhra Pradesh and Rajasthan.
  2. They unite academic research, employing cost-benefit analysis, with sector expert input, broad and inclusive stakeholder engagement, and extensive policy outreach to evaluate and prioritize the smartest interventions.
  3. The researchers looking at power distribution found the agriculture sector, one of the most inefficient electricity users.

Crippled Policy Measures

  1. In the 1960s, the rural electrification programme was introduced to enhance agricultural output using groundwater for irrigation.
  2. Due to un-metered supply and the flat-rate electricity tariff provided for irrigation, the number of pump sets increased substantially and unregulated and free water has contributed to over-exploitation of groundwater resources.
  3. Subsidized power intended to benefit farmers allowed problems such as pilferage and theft, and disguised losses from the utilities, which degraded their finances.

What incurred such heavy loss?

  1. One of the major reasons for the high losses was the adoption of a low tension (LT) distribution network spread over long distances to serve dispersed, small, individual agriculture connections.
  2. This resulted not only in high technical losses, but also in theft facilitated by un-metered supply and the flat tariff.
  3. This has adversely affected farmers by making the supply and quality of power unpredictable and by providing it mainly during the night hours.
  4. This resulted in frequent failure of pump sets, forcing farmers to use inefficient motors, and keep the pump sets constantly on, wasting energy and causing overexploitation of groundwater.
  5. This is a vicious cycle in which farmers, distribution companies and state governments alike face ever-increasing losses.

Solutions over Distribution Losses

The researchers propose two solutions.

(A) The first is to introduce a high-voltage distribution system (HVDS), by upgrading the network and replacing transformers.

  • Andhra Pradesh (AP), which has already made a strong start on conversion of its LT network to HVDS, managing to reduce losses to 12%, has demonstrated that this approach works.
  • The biggest saving would come from the fact that pump sets wouldn’t fail so often.
  • Factoring in carbon savings, it will also benefit energy savings and the reduction in transformer failure.

(B)  The second solution proposed by the researchers—replacing inefficient pump sets with energy efficient ones—further enhances the return on investment.

  • We would need not only the high-voltage distribution system to be set up, but also to replace all existing pumps.
  • Yet, the total benefits would grow even more, allowing each rupee to generate ₹3 of social benefits through lower pump breakage along with energy savings and carbon savings.
  • These interventions will enable reduction in the subsidy by governments for irrigation amounting to at least ₹3,000 crore in AP and about ₹7,000 crore in Rajasthan, which could be redirected to other spending.

Way Forward

  1. This study project highlights the lasting challenges that can result from well-meaning decisions such as the low-tension distribution network.
  2. Two pronged strategy needs to be envisaged to counter losses incurred by discoms which are already under revitalisation.
  3. And on the other hand, losses incurred in agriculture needs to be curbed with the help of above mentioned strategies.
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