Implementation Lag Continues: Only 8 Mn Smart Meters Installed in India Under RDSS, Says Icra

Despite the ambitious goal of 250 million, only eight million smart meters have been installed under the Revamped Distribution Sector Scheme (RDSS), according to a report by rating agency Icra. This indicates a significant lag between approval and implementation. 

This discrepancy raises questions about the efficiency and obstacles preventing this important energy management technology from progressing further in India.

The RDSS aims to replace 250 million conventional meters with smart ones to improve efficiency and reduce losses. While initial deployment was slow, a significant ramp-up is expected, driven by optimised tenders and discom’s financial health.

Earlier, the central government introduced the RDSS in July 2021. This initiative aimed at reducing aggregate technical and commercial (AT&C) losses to 12 to 15 per cent by 2025, coupled with bridging the gap between the cost of supply and tariff to zero.

Further, Icra highlighted that strategic customer selection and financial viability of bidders as key elements for success. The scheme has the potential to modernize India's power distribution network and transform the sector.

A key facet of the RDSS scheme involves the phased replacement of conventional meters with smart meters, with an ambitious nationwide target of replacing 250 million conventional meters. Started under the design, build, finance, own, operate and transfer (DBFOOT) model, the scheme entrusts advanced metering infrastructure service providers (AMISPs) with the responsibility of supplying, financing, installing and operating smart meters, alongside the requisite communication and IT infrastructure.

Meanwhile, as of December 2023, the Centre had sanctioned a total of 222.3 million meters, with 98.7 million meters already awarded to AMISPs through the bidding route.

While the installation figures might seem conservative, the report anticipates a significant uptick in the pace of installations over the next two years. This surge is expected to be driven by advancements in the tendering process and the government's efforts to improve the financial health of distribution utilities.

The switch to smart meters is not merely a technological upgrade but a strategic move aimed at enhancing the billing and collection efficiency of distribution utilities. Icra emphasises the importance of discoms being judicious in selecting customers for meter replacements, considering their consumption potential to achieve net positive savings during the transition.

Further, the report analysed that the financial viability of winning bidders is closely tied to the capital cost associated with setting up smart meters and their infrastructure. The availability of a direct debit payment mechanism, routing online payments from consumers to AMISPs, is identified as a potential mitigator for counterparty credit risks associated with discoms. 

However, the effectiveness of this mechanism is yet to be demonstrated.