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REPORT

ON
RE8TRUCTURNG
OF APDRP
P. Abraham
Chairman, Task Force
&
Former Secretary,
Govt. of India,
Ministry of Power
Ministry of Power
Government of ndia
October 2006
New 33/11 kV Substation at Bamunimaidan (Assam)
ABC Cables
i
The availability of electricity and quality and reliability of supply is critical to the economic growth of the
country more so in the Indian context, where an eight to ten percent growth rate is expected in the coming
years. It is well known that mere availability of electricity is not sufficient but also a reliable supply of electricity
would accelerate economic growth and would help in achieving double digit growth in GDP.
This will require accelerated reform in the power sector to achieve commercial viability and high efficiency in
the distribution sector. A financially viable, robust electricity sector, which is also market sensitive and customer
oriented will form the platform for Indias drive to achieve economic greatness. This could be achieved, if
reform in the power sector are intensified, the sector is subjected to external oversight regularly, efficiency
and control of losses are achieved especially in the electricity distribution, the sector is restructured to
respond to the market process and if full cost recovery is allowed.
The electricity distribution is the most challenging task in the sector on account of the interface with a large
number of customers with varying needs and expectations and different proportionality to pay. It is in distribution
that more than eighty percent of the losses occur. The commercial viability of the sector will depend on the
reduction of these Aggregate Technical and Commercial (AT&C) losses. The Accelerated Power Development
and Reform Programme is playing a vital role in this aspect and would continue to do so.
The programme provides much needed investment to the distribution sector. By way of incentivizing, it also
motivates the utilities to bring down their cash loss. Under the restructured APDRP, states will be required to
adopt reform to become eligible for APDRP as it was observed that states, which adopted reforms, performed
better.
The Task Force is of the view that mere strengthening of the distribution network will not be able to bring
down the losses. Utilities will have to take up commercial measures like energy accounting & auditing,
managerial initiatives for making the employees more accountable, adoption of Information Technology for
improving efficiency and enhance consumer satisfaction.
The Utilities should identify the priorities and prepare a roadmap for improving Key Performance Indicators
(KPIs), implement a business plan for early financial turnaround, initiate a programme to adopt best practices,
bring necessary process changes and modifications to ensure that the efficiencies are sustained.
I am extremely grateful to all the members of the Task Force for their valuable suggestions in arriving at the
recommendations contained in the report. I am also thankful to the staff of Ministry of Power, particularly
Shri Arvind J adhav, J oint Secretary and Convenor of the Task Force and APDRP Cell, for their inputs,
contributions and help in finalization of the report.
(P. Abraham)
Former Secretary
Govt. of India
Ministry of Power
Chairman, Task Force
PREFACE
i i
Consumer Care Center
Meters after replacement
iii
Page No
Preface i
Executive Summary v-ix
Abbreviations Used x-xii
CHAPTER 1: INTRODUCTION 1-2
1.1 Background 1
1.2 Terms of Reference 2
1.3 Scope and Intent of the Report 2
CHAPTER 2: REVIEW OF APDRP 3-9
2.1 Description of the Programme 3
2.2 Scheme Status 5
2.3 Review of APDRP 9
CHAPTER 3: VIEWS OF VARIOUS AGENCIES 11-23
3.1 Views of Planning Commission 11
3.2 Views of Advisor cum Consultants 11
3.3 Views of Utilities 13
3.4 Views of Evaluators 17
3.5 Views of Ministry of Power 18
3.6 Views of Central Electricity Authority 21
3.7 Views of Ministry of Finance 22
CHAPTER 4: OBSERVATIONS OF THE TASK FORCE 25-34
4.1 National Level Interventions 25
4.2 State Level Interventions 27
4.3 SEB Level Interventions 27
4.4 Town Level Interventions 29
4.5 Feeder Level Interventions 30
4.6 Consumer Level Interventions 30
4.7 APDRP Targets 30
4.8 APDRP Implementation 33
4.9 APDRP Incentive 33
4.10 General Observations 34
CHAPTER 5: RECOMMENDATIONS OF THE TASK FORCE 35-40
5.1 Continuation of APDRP 35
5.2 Eligibility Criteria for APDRP Assistance 35
5.3 APDRP Assistance to Private Utilities 36
5.4 Objectives of APDRP 37
5.5 Support under APDRP 37
5.6 Funding under APDRP 38
5.7 Implementation and Monitoring 39
CONTENTS
iv
ANNEXURES 41-60
Annexure - I Office Memorandum for Constitution of Task Force 41
Annexure II Status of APDRP Investment Component 43
Annexure III Status of Incentive Claims 44
Annexure IV Sample Memorandum of Agreement under APDRP 45
Annexure V Status of Power Sector Reforms 55
Annexure VI Commercial loss of Power Utilities 56
Annexure VII 11 kV Feeder Metering Status 57
Annexure VIII Consumer Metering Status 58
Annexure IX AT&C Loss, Billing & Collection Efficiency of Distribution Utilities 59
List of Tables
Table 2.1 Allocation of APDRP Fund 5
Table 2.2 APDRP Sanctions and Implementation 8
Table 2.3 Profit / Loss of State Power Utilities 9
Table 3.1 Major Delays in Transfer of APDRP Fund 14
Table 4.1 Loss of Utilities as Percentage of Turnover 32
List of Figures
Figure 4.1 Commercial loss of Power Utilities without Subsidy 28
Figure 4.2 Billing & Collection Efficiency and AT&C Loss 31
List of Boxes
Box 2.1 Main recommendations of Deepak Parikh Committee 4
Box 2.2 Key features of One Time Settlement Scheme 5
Box 2.3 Priority Items- Category A 6
Box 2.4 Priority Items- Category B 6
Box 2.5 Benchmarking of Performance Parameters at Utility level 7
Box 2.6 Benchmarking of Performance Parameters at Town level 7
Box 3.1 Suggestion of Utilities on Investment Needs in Distribution 17
Box 4.1 MOA Conditions 26
Box 4.2 Improvement in Commercial loss of the utilities 28
Box 4.3 Measures by States for Prevention of Theft of Electricity 29
Box 4.4 Reduction of AT&C loss below 15% in APDRP Towns 30
Box 4.5 Improvement in Billing & Collection Efficiency 32
Box 4.6 Main Reasons for Delay in APDRP project implementation 33
v
1.0 Background
The Government of India initiated various reforms in the Power Sector with an objective of bringing about
commercial viability to the State Power Utilities. It took various initiatives towards reforms and other policy
measures for helping the state power Utilities to bring improvement in their efficiency. However, these steps
were not sufficient to bring about commercial viability of SEBs. This called for a focussed attention to problems
afflicting the customer Utility inter-face, that is, the sphere of electricity distribution.
In order to achieve commercial viability, Ministry of Power formulated a six level intervention strategy and to
operationalise the strategy, Ministry launched Accelerated Power Development Programme in the year 2000-
01. The programme had investment component only. However, on recommendation of Deepak Parikh
Committee on State Specific Reforms, incentive component was also included with an emphasis and the
programme was rechristened as Accelerated Power Development and Reform Programme (APDRP) in
2002-03.
The Ministry of Power took up the evaluation of the programme through independent agencies. While
recommending the continuance of the APDRP beyond 10
th
Plan, the evaluators made certain suggestions
for incorporating in the programme for achieving better results. The utilities and the Planning Commission
had also proposed certain modifications in the programme. Considering this, the Ministry of Power constituted
a Task Force to assess and analyze the current efforts, suggestions made by various agencies and to
suggest restructuring of the programme to achieve the objectives of APDRP.
2.0 Scheme Status
The Government had approved the programme with a budget provision of Rs. 40,000 Crore during Xth
Plan, out of which Rs. 20,000 Crore was allocation under Investment component and Rs. 20,000 Crore
under Incentive component. However, the Government actually allocated only Rs. 12,322 Crore.
Under the investment component, Ministry so far sanctioned 583 projects with overall estimated outlay of
Rs. 19180.46 Crore. However, the Utilities were able to complete only about 50% work amounting to Rs.
9730.48 Crore.
Under incentive component of APDRP, 19 states submitted their incentive claims to the Ministry amounting
to Rs. 10,795.69 Crore, since launch of the programme. However, on scrutiny by independent evaluators,
only 8 states were found eligible for incentive. Total incentive amounting to Rs. 1536.62 Crore was released
among these states.
3.0 Views of Various Agencies
The Task Force considered the views of the Planning Commission, Advisor cum Consultants, Central
Electricity Authority, Ministry of Power and Ministry of Finance regarding their experience and suggestions
for improvement for making the programme more effective. Views of some Utilities were also taken into
consideration.
The Planning Commission had proposed bifurcation of feeders, automated metering of all distribution
transformers, and GIS mapping of all consumers for effective energy accounting and to incentivised staff for
EXECUTI VE SUMMARY
vi
efficiency improvement. They proposed for providing funds initially as debt to be later changed into grant
based on achievements.
The Advisor cum Consultants, Evaluators and the Ministry were of the view that the programme helped the
distribution Utilities in up-gradation of their old and overloaded networks, bringing in commercial approach
and accountability, up-gradation of skills and adopting best practices. They remarked that though there
have been considerable improvements in some of the Utilities, others were yet to show significant change
due to late start by them. They pointed out that the Utilities, which took the initiatives as prescribed in the
MoA showed better improvement.
The Utilities were of the view that the programme brought much needed investment to the distribution
sector, which helped them in building infrastructure, strengthening and up gradation of the network. This in
turn resulted in reduction of AT&C losses, DT failure rate, interruptions & outages and improvement in
customer satisfaction. They were of the view that the distribution infrastructure was weak and that infrastructure
building was required initially in the distribution and that modernization activities can be taken up only after
the existing network was brought to a certain level. Utilities expressed that for the first 3 years of the programme
little would have been achieved, however from the third year onwards, a declining trend can be noticed,
which was in line with the Project Management Cycle. The new APDRP now needs to focus on furthering
this process so that a cascading effect can be achieved.
Ministry was of the view that the implementation of the schemes was in advanced stage in few states/towns
and the results can be expected from them only and not from the whole state or country. The Ministry
informed that AT&C Losses have been brought below 20 percent in 212 APDRP towns in the country of
which 169 towns have brought AT&C losses below 15 percent. It was mentioned that results would have
been better if State Departments were paying their electricity dues especially for water pumping and street
lighting. The overall commercial loss of the Utilities reduced from Rs. 29,331 Crore during 2001-02 to Rs.
22,129 Crore during 2004-05.
All the agencies pointed out certain bottlenecks faced during implementation of the schemes. The main
bottlenecks were poor response of states on reforms, delay in transfer of fund by the states, unrealistic
DPRs, delay in supply of equipments due to increased demand, heavy quantum of work, increase in price of
materials/equipments, poor response to turnkey offers, employees resistance to outsourcing and delay in
finalizing IT road map for the Utility.
While recommending continuation of APDRP, they suggested certain improvements to make the programme
more effective. The suggestions were mainly towards better planning, project management, direct release
of fund to the utilities, fixing of realistic targets, increased financial assistance, preparation of standard
guidelines & specification, flexibility in DPRs, adoption of Information Technology, HVDS and provision for
training etc.
4.0 Observations of the Task Force
The Task force observed that the Ministry had evolved a six level intervention strategy to bring about
commercial viability in the electricity distribution sector. Under the strategy, steps were required to be taken
at National, State, SEB, Circle/town, feeder and at Consumer levels.
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The Task Force appreciated the initiatives taken by the Ministry at national level in respect of notification of
Electricity Act, National Electricity Policy, Tariff Policy and other policies and guidelines. It also appreciated
its efforts towards propagating best practices in the power distribution system for training of the Utility
employees. The Task Force also noted the efforts of AcCs in assisting the Utilities and the Ministry in
finalization of the projects, implementation and monitoring.
At state level, Task Force observed that many of the states were yet to adopt reform path and that the
performance of the Utilities was much better in states where there was commitment for reforms in comparison
to other states. At SEB level, it was observed that there was mixed achievements on the proposed
interventions. Some of the Utilities adopted feeder manager approach to make the field level officer
accountable and through monitoring of their performance, achieved very good results in form of improvement
in all the KPIs. The monitoring of achievements has improved to great extent in many Utilities. However,
much was still desirable in some of the Utilities.
The Task Force observed that trend in increase in commercial losses of the Utilities has not only been
arrested but now it was on a downward trend at the National level. The reduction in theft and pilferage of
power was an important activity Utilities had to undertake towards reducing AT&C loss and achieving the
commercial viability. The Task Force observed that some of the states were not able to deal effectively with
power theft cases.
At the town level, though reduction in AT&C losses and DT failure rate has been reported in most of the
towns, where APDRP work has been considerably completed, it was however observed that significant
reduction was only in few states.
Task Force noted that though about 96% of the feeders have been metered at national level, however,
energy auditing was at initial level. It was observed that such of the feeders, where augmentation has been
done and the energy accounting has started, outages have reduced and significant improvement has been
achieved in respect of AT&C losses and DT failure rate.
It was noted that the metering of agricultural consumers has not been taken up by most of the states. Task
Force was of the view that it will not be possible to reduce the technical as well as commercial losses without
metering each and every consumer, smaller or bigger, including agriculture.
The Task Force observed that AT&C losses of 5.06% was reduced at national level during three years, i.e.
1.68% reduction per year as against a target of 9% per year. The achievement can not be considered as
small as the actual implementation of the programme started quite late, though it could have been better.
The Task force observed that the improvement in billing and collection efficiency has taken place in most of
the Utilities. The trend of sell more lose more has reversed, which should be appreciated. While analyzing
the collection efficiency of the Utilities, Task Force did observe that payments of the electricity dues by
Government Departments/local bodies impacted the revenue collection by the Utilities.
It was observed by the Task Force that majority of the APDRP projects were sanctioned during 2002 and
2003. However, only few states took prompt action towards quick implementation of these projects. It was
observed that there has been delay in implementation of the APDRP projects. Though, there could be many
reasons for delay, the Task Force observed that most of these delays could have been avoided, if projects
viii
were prepared based on good planning through new technologies. Hence, there was a need of better
planning, data management, project management and monitoring.
The Task Forces noted that some Utilities diverted funds under this scheme for their normal O&M work and
it has felt that this should not be allowed. The Task Force observed that the Utilities, which executed CAT-A
schemes, derived better results, though, CAT-B schemes were also necessary.
The Task Force observed that incentive was a big motivating factor for the Utilities for reducing their losses
through efficiency improvements. It noted that some of the states, which took the incentives earlier, could
not take up the incentive again. This would indicate that the Utilities are not consistent in their performance
which needs to be analyzed and corrective measures taken. It was observed by the Task Force that though
many of the Utilities have reduced their commercial losses but only few of them achieved reduction in cash
losses. The main reasons for not achieving the cash losses reduction were for supplying free power for
agriculture sector, inadequate subsidy in form of tariff compensation and increase in receivables.
The Task Force observed that the APDRP was still at initial stage and was of the view that the full benefits
of the programme can not be expected at this stage and that the assessment of benefits from the programme
should be made after covering all the district headquarter towns at least and when sufficient work has been
completed.
5.0 Recommendations
The recommendations of the Task Force with regard to Restructuring of APDRP for supporting Reforms in
the State Power Utilities are summarized below:
a. APDRP may be continued with investment and incentive component beyond the Xth Plan
b. The conditions for availing assistance under the programme may be made more stringent with an
objective to make States/Utilities to adopt reforms. The primary conditions viz
i. Restructuring of SEB/Power Deptt.
ii. Constitution and operationalisation of SERC;
iii. Establishment and operationalization of special courts and police stations under anti-theft
provisions of the Electricity Act 2003.
as mentioned in the report will have to be fulfilled by the states for becoming eligible for the APDRP.
The states will also have to commit achievement of targets for secondary conditions viz
i. Finalization of Roadmap/Financial Restructuring Plan approved by the Regulator and State
Government;
ii. Adoption of Multi-Year Tariff;
iii. 100% system metering up to 11 kV feeders;
iv. Energy accounting and auditing;
v. 100% metering of non-agriculture consumers in the Utility;
vi. 100% metering of consumers including agriculture consumers in the APDRP covered areas;
i x
vii. Establishment of consumer care centers in all the district towns.
as approved by the Ministry, which will be based on the present performance level of the Utilities.
c. The APDRP assistance, both investment and incentive component, may be extended to the Private
Distribution Utilities also. The incentive for loss reduction by the private utilities may be given to the
State instead of the utility.
d. The Task Force recommends following targets for reduction in AT&C losses by the Utilities:
i) Utilities having AT&C losses above 40%: Reduction by 4% per year;
ii) Utilities having AT&C losses between 30 & 40%: Reduction by 3% per year;
iii) Utilities having AT&C losses between 20 & 30%: Reduction by 2% per year;
iv) Utilities having AT&C losses below 20%: Reduction by 1% per year.
e. The projects taken up under the programme should be aimed at reducing AT&C losses, improvement
in quality and reliability of power and improvement in consumer services.
f. Utilities should prepare a roadmap with priorities for works to be taken up under the investment
component and execute the work by adopting best practices.
g. Each Distribution Company may be considered for calculation of incentive against cash loss reduction.
Ministry may devise additional methods also for incentivizing Utility and Utility employees for
improvement in performance.
h. Under the investment component of the programme, the grant may be increased to 50% of the project
cost for the general category states.
i. In order to keep the focus of the states and Utilities towards reforms and the improvement in the
sector, Government should commit sufficient non-lapsable fund for the programme.
j. The programme may be converted into a Central scheme for speedy implementation.
k. The assistance under the programme should focus mainly on such activities, which will help in quick
reduction of AT&C loss and improvement in customer services,
l. The programme should have a provision of 5% for training the Utility personnel, hiring consultants,
undertaking studies, project evaluation etc.
m. The DPRs for the new projects should be made more realistic. The tender documents and specifications
should be standardized by the AcCs in consultation with the Utilities. It should contain a quality plan
and also provisions for price variations during execution. A variation of plus or minus 10% to 15% may
be allowed in quantity or value of items within overall sanctioned cost of the scheme.
n. Execution of all the schemes should be on turnkey system only by adopting standard specifications,
except in cases where approval of the Ministry is taken in advance.
o. Utilities, AcCs and Ministry of Power should closely monitor the implementation of APDRP projects
and progress of the Utilities towards achievement of the set targets.
***
x
ABC Arial Bunched Cable
AcC Advisor cum Consultant
ACS Average Cost of Supply
AEC Ahmedabad Electricity Company
AP Andhra Pradesh
APCPDCL Andhra Pradesh Central Power Distribution Co. Ltd.,
APDP Accelerated Power Development Programme
APDRP Accelerated Power Development & Reform Programme
APEPDCL Andhra Pradesh Eastern Power Distribution Co. Ltd.,
APNPDCL Andhra Pradesh Northern Power Distribution Co. Ltd.,
APSPDCL Andhra Pradesh Southern Power Distribution Co. Ltd.,
ARR Average Revenue Realisation / Annual Revenue Return
ASCI Administrative Staff College of India
AT&C loss Aggregate Technical & Commercial loss
AVVNL Ajmer Vidyut Vitran Nigam Ltd.,
B.U. Billion Units
BESCOM Bangalore Electricity Supply Company
BEST The Brihan Mumbai Electric Supply & Transport Undertaking
BRPL BSES Rajdhani Power Ltd.,
BSEB Bihar State Electricity Board
BYPL BSES Yamuna Power Ltd.,
CARE Credit Analysis & Research Ltd.
CEA Central Electricity Authority
CEO Chief Executive Officer
CESCO Central Electricity Supply Company of Orissa
CIS Customer Information System
CMD Chairman & Managing Director
CPRI Central Power Research Institute
CPSU Central Public Sector Undertaking
D/S Distribution System
DHBVNL Dakshin Haryana Bijli Vitran Nigam Ltd.,
Abbr evi at i ons Used
xi
DISCOMs Distribution Companies
DPR Detailed Project Report
DRUM Distribution Reform Upgrade and Management
DT Distribution Transformer
DVVNL Dakshinanchal Vidyut Vitran Nigam Ltd.,
GDP Gross Domestic Product
GEB Gujarat Electricity Board
GIS Geographical Information System
HESCOM Hubli Electricity Supply Company
HP Himachal Pradesh / Horse Power
HT High Tension
HVDS High Voltage Distribution System
IIM Indian Institute of Management
IT Information Technology
J &K J ammu& Kashmir
J DVVNL J odhpur Vidyut Vitran Nigam Ltd.,
J E J unior Engineer
J SEB J harkhand State Electricity Board
J VVNL J aipur Vidyut Vitran Nigam Ltd.,
KPI Key Performance Indicator
KPTCL Karnataka Power Transmission Company Ltd.,
LD Liquidated Damages
LT Lower Tension
MESCOM Mangalore Electricity Supply Company
MIS Management Information System
MOA Memorandum of Agreement
MOF Ministry of Finance
MOP Ministry of Power
MOU Memorandum of Understanding
MP Madhya Pradesh
MSEB Maharashtra State Electricity Board
1
1.1 BACKGROUND
1.1.1 The Government of India initiated various reforms in the Power Sector with an objective of bringing
about commercial viability to the State Power Utilities. The health of the State Power Utilities not only
affects the state power sector but it also affects the fiscal health of the states, the central generating &
transmission Utilities and the overall performance of the economy of the country. All the states have
also recognised the importance of the power sector and most of them have adopted the reform path.
1.1.2 The Ministry of Power took various initiatives towards reforms and other policy measures for helping
the state power Utilities to bring improvement in their efficiency towards bringing about commercial
viability in the power sector. Some of the major initiatives were establishment of regulatory mechanism
at central and state level, restructuring of the state power Utilities. However, these steps were not
sufficient to bring about commercial viability of SEBs, the lack of which has stymied power sector
reforms. This called for a focussed attention to problems afflicting the customer Utility inter-face,
that is, the sphere of electricity distribution.
1.1.3 In order to achieve commercial viability, Ministry of Power formulated a six level intervention strategy
that encompasses initiatives at national level, state level, SEB/Utility level, distribution circle level,
feeder level and the consumer level. To operationalise the strategy, Ministry launched a national level
Accelerated Development Programme in 2001. The Accelerated Power Development Programme
(APDP) was introduced in the year 2000-01. The programme had only investment component under
which the Government was providing Additional Central Assistance to the states for strengthening and
up gradation of distribution network and also for Renovation & Modernization/Renovation & Up gradation
of thermal/ hydro power plants.
1.1.4 The Ministry also constituted an Expert Committee under Sh. Montek Singh Ahluwalia, the then Member
(Energy), Planning Commission, to recommend measures for one-time settlement of outstanding
dues of the SEBs towards Central Public Sector Undertakings and suggest a strategy for capital
restructuring of the SEBs. On the recommendations of the committee, Tri-Partite Agreements were
signed by all the states and their outstanding dues as on 30th September 2001 were securitized.
1.1.5 The Ministry also constituted an expert committee headed by Shri Deepak Parikh, Chairman, IDFC
Limited, to assist in developing state specific reforms programme to rapidly restore and sustain the
financial viability of the power sector and effectively harness the funds under the APDP and other
sources. On the recommendations of this Committee Incentive Component was also introduced in the
programme. The rechristened programmeAccelerated Power Development and Reform Programme
(APDRP) was sanctioned by the Government in March 2003. Earlier, the assistance was being
extended to the tune of 50% of the project cost, in the form of 25% as grant and 25% as loan for
general category states and 90% as grant and 10% as loan to the special category states. Since,
March 2003 a provision of Rs. 20,000 Crore budgetary allocation under Investment component and
Rs. 20,000 Crore under Incentive component was made under the scheme. The programme was
focused on high density urban areas for achieving quick results towards bringing about commercial
viability to the power Utilities.
1.1.6 In the process of bringing reforms in the power sector, Ministry also enacted Electricity Act 2003 and
has notified National Electricity Policy and Tariff Policy.
CHAPTER1: I NTRODUCTI ON
2
1.1.7 Since launching of APDRP, the Ministry of Power progressively sanctioned 583 projects with an estimated
project outlay of Rs. 19180.46 Crore and released Rs. 6131.70 Crore in form of grant (Rs. 3857.47
Crore) and loan (Rs. 2274.23 Crore) under investment component. The Government stopped releasing
loan component w.e.f. the financial year 2005-06. The Utilities utilized Rs. 9730.48 Crore till May 2006,
which included utilization of Rs. 4489 Crore of counterpart funds from FIS and other sources also.
1.1.8 The Ministry of Power took up an evaluation of the programme through independent agencies namely
IIM-Ahmedabad, Tata Consultancy Services, Administrative Staff College-Hyderabad, The Energy
Research Institute (TERI) and SBI CAPS during 2005. The evaluators observed that the APDRP had
been instrumental in helping the power Utilities in improving their efficiency, reducing AT&C loss,
improving quality and reliability of supply and improving the accountability. They also observed that the
programme was successful in bringing about a cultural change in the working of the Utilities and the
Utilities have started thinking on commercial lines, which did not exist earlier. The evaluators observed
that the improvement was of varying degree in different Utilities depending on their commitment towards
the improvement. While recommending the continuance of the APDRP beyond 10
th
Plan, the evaluators
recommended certain suggestions for incorporating in the programme for achieving better results.
1.1.9 In the Mid Term Appraisal of the APDRP, the Planning Commission also proposed certain modifications
in the programme either during the 11
th
Plan or in the last year of the 10
th
Plan.
1.1.10Considering the proposed modifications from the evaluators and the Planning Commission, the Ministry
of Power constituted a task force for restructuring the APDRP.
1.2 TERMS OF REFERENCE
1.2.1 The terms of reference of the Task Force are as follows:
a) To assess the current efforts under APDRP;
b) Analyze the current reforms initiatives that are being pursued by the states with
reference to the objectives of APDRP;
c) To assess the need for modifications in the light of independent evaluations and other feed
back;
d) Suggest measures to achieve the objectives of APDRP.
A copy of the office memorandum of Ministry for constitution of Task force with terms and conditions and list
of the members of the Task Force is provided at Annexure-I.
1.3 SCOPE AND INTENT OF THE REPORT
1.3.1 The committee examined various reports of earlier committees set up by the Ministry of Power, report
of the Planning Commission, review proceedings of the Ministry, reports of evaluators, reports of
select Utilities representing various regions, MOUs / MoA signed by the states/Utilities and provisions
of Electricity Act 2003. The committee observed that it was too early to expect desired results from the
programme, as the implementation was still at initial stages, but was an appropriate time for reviewing
the programme and to take mid-term corrections.
3
2.1 Description of the Programme
2.1.1 In order to achieve commercial viability in the power sector, Ministry of Power formulated a six level
intervention strategy that encompasses initiatives at national level, state level, SEB/Utility level,
distribution circle level, feeder level and the consumer level. This six level intervention strategy focussed
on accountability, deliverability and performance at all levels to rejuvenate the distribution sector, where
the maximum interface with the ultimate customers exists, the highest value addition occurs, and
eighty percent of total AT&C losses including nearly all the commercial losses take place in the distribution
sector. Improvement in distribution must result in greater accountability and higher revenue realization.
The strategy involved technical, commercial, financial and IT interventions, organizational and
restructuring measures and incentive mechanism for cash loss reduction.
2.1.2 To operationalise the strategy, APDP was launched in 2001 that would cover the entire country to
strengthen the sub-transmission and distribution network and to restructure Utilities at the distribution
circle level. As per the cabinet decision, the programme was to continue till 2012.
2.1.3 While adopting a project mode, this strategy in the first instance targeted to reduce outages and
interruptions and reduction of Aggregate Technical & Commercial (AT&C) losses to fifteen percent. To
achieve the above objectives, 63 distribution circles were identified to be developed as centres of
excellence through certain techno-commercial- organisational interventions. Ministry appointed NTPC
and POWERGRID as Advisor cum Consultant for capacity building of the State Electricity Boards and
also to supervise project implementation.
2.1.4 On the recommendations of the Expert Committee on State Specific Reforms headed by Shri Deepak
Parikh, Incentive Component was also introduced in the programme and the focus of the programme
was kept on high density urban and industrial areas for achieving quick results (See Box 2.1). The
rechristened programme Accelerated Power Development and Reform Programme (APDRP) was
sanctioned by the Government in March 2003.
2.1.5 The assistance for strengthening and up gradation of distribution network by the Utilities was considered
necessary as the condition of the distribution network was old and was responsible for high technical
and commercial losses, poor quality & reliability of power supply and required massive investments.
2.1.6 While seeking approval of Government of India on APDRP, following expected benefits of the programme
were listed:
i. Reduction of AT&C losses from the existing around 60% to around 15% in five years to begin
with in the urban areas and high density/ consumption areas. This means that reduction of
AT&C loss @ 9% per annum was targeted.
ii. Significant improvement in revenue realization leading to additional realization of Rs.20, 000
Crore approximately over a period of 4-5 years.
iii. Reduction of technical losses would result in additional energy of nearly 6,000 7,000 MW to
the system, avoiding the need of 9,000 to 11,000 MW of fresh capacity addition besides avoiding
investments to the tune of Rs.40,000 to Rs.60,000 Crore;
CHAPTER 2: REVI EW OF APDRP
4
iv. Quality of supply and reliable, interruption free power will encourage usage of energy efficient
equipments / appliances, which will further lead to improvement in availability of energy.
v. Reduction in cash losses on a permanent basis to the tune of Rs.15, 000 Crore.
vi. Distribution reform as envisaged above will help the States to avoid heavy subsidies, which are
given to the SEBs by State Governments. They would be able to invest this amount for providing
basic services like Health, Education, and Drinking Water etc.
Box-2.1: Main recommendations of Deepak Parikh Committee
The Government should ex-ante commit to a level of funding
Access to assistance under APDRP subject to signing off on the SEB dues settlement
scheme
There would be two streams of support from the APDRP fund- Investment and Incentive
Investment component under APDRP be directed towards concentrated zones
APDRP funds should also be accessible for private distribution Utilities subject to adequate
safeguards to ensure that these Utilities pass on the benefits arising out of such investment
to the end consumers.
SERCs may consider taking such steps as may be necessary to make the adoption of
multi-year approaches as soon as possible
Privatization of concentrated zones and the introduction of private participations in the
other areas, so as to enable harnessing of the private sectors focus of operational and
investment efficiency and viability of enterprise
State Government should take over all liabilities of SEBs and write off its own loans to the
SEB to enhance the credibility of the restructuring process
2.1.7 Under the investment component of the programme, funds are provided as Additional Central Assistance
to the state Utilities through respective state Governments. To make the programme more attractive,
the grant: loan ratio was improved as 50:50 against normal ratio of 70:30. In the beginning assistance
to the tune of 50% of the project cost was being extended in form of 25% grant and 25% loan. For
special category states the grant was 90% and balance 10% as loan. However, on the recommendations
of 12
th
Finance Commission the loan component was discontinued from 2005-06. Now only 25% grant
is being provided to the general category states and 90% to the special category states since April
2005. The allocation of fund to the states was not based on state quota but on the basis of their
preparedness towards reforms, preparation of projects and their implementation.
2.1.8 Assistance under Incentive component was introduced to motivate the Utilities to reduce their cash
loss as it was felt essential to integrate the investment programme in the distribution segment with an
incentive mechanism linked to efficiency improvement. It was envisaged that it will help the Utilities to
bring about commercial viability through improvement in billing and collection efficiency, which were
considerably low at the time of introduction of the programme.
5
Box- 2.2: Key features of One Time Settlement Scheme
For the state participating in the scheme, 60% of interest / surcharge on the delayed payments
as on 30
th
September 2001 would be waived off.
The rest of the dues amounting to the full principle amount as well as the remaining 40% of the
interest/surcharge would be securitized through bonds issued by the respective State
Governments.
The bonds would be issued through RBI at a tax free interest rate of 8.5% per annum.
For ensuring timely payment of current dues in future, defaults in current payments for power
/ fuel would attract a graded reduction in the supply of power from central power stations and
in coal supplies.
Where such defaults exceed 90 days from the date of billing, the Ministry of Finance shall
recover these dues through adjustment against releases due to them from the centre.
CPSUs shall offer incentives to SEBs for compiling with the schemes.
Outstanding dues as on 30
th
September 2001 would form the basis of the one time settlement.
2.2 Scheme Status
2.2.1 The Government had approved the programme with a budget provision of Rs. 40,000 Crore during X
Plan, out of which Rs. 20,000 Crore was allocation under Investment component and Rs. 20,000
Crore under Incentive component. However, the Government has allocated funds under APDRP (see
Table 2.1). In addition to the assistance by Government, the Utilities have drawn counterpart fund
amounting to Rs. 4560 Crore from Power Finance Corporation/Rural Electrification Corporation/other
sources.
Table 2.1: Allocation of APDRP Fund
(Rs. in Crore)
Year BE RE Actual Expenditure
Investment Incentive Total
2002-03 3500.00 1089.00 1755.52 379.28 2134.80
2003-04 3500.00 3300.00 2356.51 503.30 2859.81
2004-05 3500.00 1700.00 1428.73 73.00 1501.73
2005-06 1172.00 1172.00 590.94 581.06 1172.00
2006-07 650.00 104.41 104.41
TOTAL 12322 7261 6236.11 1536.64 7772.75
a. Investment Component
i) Project Formulation: The Utilities were required to prepare Detailed Project Reports (DPRs)
for each of the high density areas in order of priority, which were to be vetted by AcCs before
approval by the Steering Committee. Implementation of various activities / interventions was to
be prioritized to ensure quick improvements in reliability and quality of power supply, reduction in
6
AT&C losses, and increase in revenues and reduction in outages. The focus was on 11 KV
feeders, Distribution transformers and the Consumers. The activities were prioritized by the
Ministry/AcC in consultation with the Ministry of Finance under category A and B (see Box 2.3
and 2.4).
ii) Procedure for sanction of Projects: Under the programme, Utilities prepare Detailed Project
Reports (DPR) and submit to the Advisor cum Consultants (AcCs). These reports are scrutinized
by the AcCs and after vetting of these DPRs, they recommend the DPRs to the Ministry for
sanction. These vetted DPRs are put up by the Ministry for the consideration of APDRP Steering
Committee.
The Steering Committee is headed by the Secretary (Power) and has the members from Planning
Commission, Ministry of Finance, NTPC, POWERGRID, Power Finance Corporation (PFC)
and Rural Electrification Corporation (REC). The committee sanctions the projects on merit
after reviewing the performance of the Utilities vis--vis earlier sanctioned schemes. The DPRs
contains the activities proposed to be implemented by the Utility, expected improvements in
respect of benchmark parameters in respect of loss reduction, improvement in the quality of
supply and consumer services and the cost-benefit analysis. Normally, these projects have a
pay back period of 3 to 4 years.
iii) Project Implementation: After the project is sanctioned, the Utilities take up the tendering
process and place the awards. Based on the recommendations of Technical Committee on
Distribution, Utilities were asked to implement sanctioned projects under this programme on
turnkey basis to ensure quality and expeditious works. The Committee had also recommended
standardization of technical specifications of equipments. In spite of clear guidelines of the
Ministry for implementing the projects on turnkey basis and standardization of specifications by
AcCs, many of the Utilities did not adopt the same with the reasoning that the conventional
method of purchase and installation was effective and economically cheaper. This resulted in
the delay of completion of the projects.
BOX 2.3 Priority Items
Category A Items
Targeted to reduce commercial losses and
increase reliability by:
Feeder Metering
Distribution Transformer Metering
Sub-Station R&M
Capacitor Placement
Distribution Transformer R&M
Service connection Improvement
IT enabling including Sub Station
Automation
BOX 2.4 Priority Items
Category B Items
Targeted to reduce technical losses and
capacity augmentation by
New Sub Stations
New Lines
Bifurcation of feeders
Reconductoring
7
iv) Precedent Conditions: Considering that Distribution reforms require a structural change in the
existing set up of the SEBs and in order to enable them to manage distribution on a profit centre
approach and to improve their performance on the basis of certain benchmarks, it was decided
that funds under APDRP will be provided only to those State Govts. /SEBs which agree to
certain precedent conditions through an Agreement. The SEBs / State Distribution Utilities were
asked to execute a SEB/Utility-specific Memorandum of Agreement [MOA] with the Ministry of
Power agreeing for adopting administrative, technical and commercial activities and improvement
in certain Utility and town level benchmark parameters.
v) Accreditation: Considering that the SEBs may or may not have adequate skills in the area and
in order to cover a large number of urban & industrial areas in the country, within 4 to 5 years, it
was felt appropriate to acquire the expertise and skills on an outsourcing basis. Therefore, it
was proposed to constitute a committee to accredit specialized agencies for the purposes of
energy audit & accounting, project formulation, turnkey implementation, project monitoring and
project evaluation. The same could not be done. However, the AcCs appointed by the Ministry
helped the Utilities in above areas.
vi) Capacity Building: It was also proposed to provide extensive training to the staff of SEBs /
Utilities at all levels to so as enable them to develop bankable project reports covering techno-
commercial activities for each circle and manage electricity distribution with a commercial
orientation. The training of about 1800 Utility personnel was provided through PMI (NTPC).
Training of about 25,000 Utility employees has been targeted under DRUM programme with the
assistance of USAID. About 6000 personnel have already received training under the programme.
Box: 2.5-Benchmarking of Performance
Parameters at Utility level
Input energy Vs metered energy sale
to consumers
T&D losses in MU
Gap between ARR and ACS per unit of
energy
Productivity
Improvement in PLF, heat rate and
auxiliary power consumption
Outstanding dues to CPSUs
Declared financial losses
Box 2.6 Benchmarking of Performance
Parameters at Circle level
Input energy Vs metered energy sale to
Consumers
T&D losses in MU
Gap between ARR and ACS per unit
of energy
Productivity
Billing cycle time
Feeder outages
Failure rate of DTs
Consumer complaints
Complaint disposal time
HT /LT Ratio
Average Load factor on DT
Average Power Factor
8
vii) Application of Information Technology: It was proposed to have a technology mission for
customizing / development of cost effective and relevant solutions for consumer and control
point data communications, remote monitoring, operation and control, etc. for the distribution
network. Involvement of IT industries in this effort was envisaged. The Ministry constituted IT
Task Force headed by Nandan Nilekani, CEO, Infosys, which prepared an IT roadmap for
distribution Utilities and identified short & long term areas for bringing higher efficiencies in the
sector.
The Ministry so far sanctioned 583 projects with overall estimated outlay of Rs. 19180.46 Crore.
The date wise sanction of the project and utilization against them is shown in Table-2 .2. However,
the Utilities were able to complete only 50% work amounting to Rs. 9730.48 Crore (as on May
2006). The state wise details are shown at Annexure-II.
Table-2.2: APDRP Sanctions and Implementation (Rs. Crore)
(As on 31/05/06)
S.N. Date of Sanction Project Cost Utilisation Work Completed (%)
a. 16/07/02 4214.39 2598.51 62%
b. 25/09/02 4064.35 2586.86 64%
c. 20/11/02 4780.38 3015.69 63%
d. 20/05/03 2003.44 732.90 37%
e. 28/11/03 767.40 238.93 31%
f. 20/09/04 1365.59 336.52 25%
g. 23/03/05 1688.04 222.31 13%
h 03/08/05 296.87 1.23 1%
COUNTRY TOTAL 19180.46 9732.95 51%
b. Incentive Component
Under this component of APDRP, the state Utilities are incentivised up to 50% of the actual cash loss
reduction by them as grant. The year 2000-01 has been fixed as the base year for calculating the reduction
of loss during subsequent years. Losses are calculated net of any subsidy & tariff compensation given by
the state Government both in base as well as during the subsequent years. The revenue is considered on
net realization basis only (increase in receivables is factored out). Incentive in the subsequent years is given
on the incremental loss reduction by the Utility. The calculation of loss is done on enterprise level. For the
states, where SEBs have been restructured, calculation for transmission and distribution Utilities is done for
assessing reduction in cash loss. The Ministry appointed M/S CARE and M/S ICRA for independent scrutiny
of the claims of the Utilities. The Ministry arranged a workshop also in association with Ministry of Finance
for clarifying the procedures of incentive calculations to the Utilities. It was decided in the workshop that all
types of subsidies will be netted off and the auditors qualifications affecting the profit or loss for the period
under scrutiny will also be factored out.
9
Since launch of the programme, 19 states submitted their incentive claims to the Ministry amounting to Rs.
10,795.69 Crore. On scrutiny of the incentive claims received so far from the Utilities, CARE and ICRA have
shown cash loss reduction by the Utilities amounting to Rs. 4376.55 Crore and have recommended release
of Rs. 2188.77 Crore. Total incentive amounting to Rs. 1536.62 Crore has already been released. The
details of incentive claims received by the Ministry, reduction in cash loss and the incentive released to
various States is shown at Annexure III.
2.3 Review of APDRP
The Task Force requested the Ministry of Power to present their view of APDRP and also to arrange
presentations from Advisor cum Consultants and few of the Utilities regarding their experience and suggestions
for improvement for making the programme more effective. Views expressed during these deliberations are
included in Chapter-4. A Round Table Conference on APDRP was also arranged by the Ministry of Power on
29
th
J uly 2006, which was attended by the representatives from Planning Commission, Ministry of Finance,
State Electricity Regulatory Commissions, Central Electricity Authority and State Power Utilities in addition
to the members of the Task Force. The views expressed by them have also been considered by the Task
Force.
Table 2.3 Profit/Loss of State Power Utilities (Rs. in Crore)
Particulars 2001-02 2002-03 2003-04 2004-05
Loss without depreciation, subsidy and tax (20,193) (10,889) (8,485) (10,446)
Depreciation 9,059 10,071 11,017 11,221
Loss (without subsidy and tax) (29,252) (20,960) (19,502) (21,667)
Subsidy Booked 14,595 13,670 10,430 11,016
Book Loss (14,736) (7,522) (9,292) (11,110)
Loss without Subsidy (29,331) (21,192) (19,722) (22,126)
Loss (without depreciation but on revenue (18,918) (4,846) (2,268) (3,438)
and subsidy realized basis)
Profit/ (Loss) (without depreciation (5,677) 2,621 1,790 329
***
10
DT Before R&M
DT After R&M
11
3.1 Views of Planning Commission
3.1.1 The Ministry brought to the notice of Task Force views of Planning Commission for making the
programme more effective. In the Mid Term Appraisal of the APDRP, the Planning Commission had
proposed the following restructuring of the programme either during the 11th Plan or in the last year of
the 10th Plan:
a. Introducing bifurcation of feeders, automated metering of all distribution transformers, and GIS
mapping of all consumers.
b. Preparation of base line data in respect of energy flow for each distribution transformers within
three months of completing the above.
c. Investment requirements for undertaking the above to be provided as 100% debt initially but,
based on timed outcomes, up to 50% of the debt to become eligible for conversion to grants.
d. Incentive for staff linked to specific measures of improvement.
e. Web-based transparency of performance at each distribution transformer level
including names of the staff responsible
f. Independent external audit to track and monitor outliers.
3.2 Views of Advisor cum Consultants (AcCs)
3.2.1 The Advisor cum Consultants were of the view that the programme helped the distribution Utilities in
up-gradation of their old and overloaded networks, bringing in commercial approach and accountability,
up-gradation of skills and adopting best practices. They remarked that though there have been
considerable improvements in some of the Utilities, others were yet to show significant change due to
late start by them.
3.2.2 The AcCs in their presentation pointed out that the MoA conditions were not implemented effectively
by the Utilities in general and therefore, desired results could not be achieved. The Utilities, which took
the initiatives as prescribed in the MoA showed better improvement. A sample copy of MOA is at
Annexure-IV. The delays in transferring the APDRP fund from state to the implementing Utilities, non
adoption of turnkey contract system, lack of project management etc. badly affected the completion
schedule of the sanctioned projects. Though most of the Utilities were not in favour of adopting turnkey
concept in the beginning, now many of them have adopted the concept after realizing the overall
effectiveness of the system in implementation of the schemes.
3.2.3 AcCs pointed out that though feeder and consumer metering have been completed to great extent by
majority of the Utilities, however reading of the meters and analysis of the data was an issue, without
which the desired results can not be achieved. AcCs observed that the Utilities were more focused on
implementing the Category-B items related to infrastructure development and less focused on Category-
A items, which were aimed at efficiency improvement. Main suggestions given by them were:
a. The funds should be given directly to the implementing agencies;
CHAPTER 3: VI EWS OF VARI OUS AGENCI ES
12
b. The responsibility of execution should be entrusted to a third party as entrusted with Rural
Electrification Corporation in case of RGGVY or an SPV;
c. Turnkey execution should be made compulsory;
d. Longer guarantee period to facilitate better quality of supplies;
e. Maintenance of the equipments by the turnkey contractor for 3 to 5 years as required level of
manpower was not available with the Utilities;
f. Standardization of tender documents and strict quality control;
g. Better role for Information Technology- building up an IT backbone based on GIS mapping
integrated with metering, billing, energy audit, consumer care etc.
h. Strict monitoring of the benchmark parameters by the Utilities.
3.2.4 The AcCs explained that the turnkey execution of the schemes has following advantages:
a. In turnkey execution, the contract was awarded to the single agency for supply as well as erection,
testing and Commissioning of the equipments. The owners responsibility was only towards
supervision of work and ensuring the quality of materials supplied by the vendor.
b. The progress of work was faster, which leads to reduction in cost and time overrun. The quality
of work was good because expert manpower from agency was available for implementation of
work.
c. As the agency was responsible for completion of work in a specific time period and delayed
completion would lead to levy of LD, normally turn key works were completed within stipulated
period, where as it was observed that departmental execution of projects take much longer
time.
3.2.5 AcCs observed that there was a notion of some Utilities that turnkey execution was costlier and proper
vendors were not available in country for execution. AcCs recommended to consider following points
during award of turnkey contract, which would lead to reduction of cost:
a. Proper terms of payment: where vendors shall be given progressive payment based on supply
of equipments, receipt and Commissioning of equipments instead of payment after taking over
of work by Utilities.
b. Splitting of supply and erection contract to avoid works contract tax which is legal as per Indian
taxation laws and already adopted by NTPC, POWERGRID etc.
c. To enforce sale in transit for the materials supplied by sub vendors and dispatched directly to
owners premises for erection.
d. The Utilities should also consider the overhead expenditure, storage cost and inventory carrying
cost while comparing the turn key execution cost vis--vis departmental execution cost
13
3.2.6 AcCs suggested that Utilities should pay attention on the followings points to increase the response of
vendors to turnkey contract:
a. The estimated cost of the works must not be less than 4 to 5 Crore so that quality bidders quote
for the work. To achieve this value the Utility can club similar type of works of number of schemes
together.
b. The payment terms of the contract must be attractive to the bidders in a way that there must be
a proper fund flow with progress of work.
3.3 Views of Utilities
3.3.1 The power Utilities from the states of Andhra Pradesh, Assam, Gujarat, Karnataka, Maharashtra,
Punjab, Uttar Pradesh and West Bengal presented their experience of APDRP. All of them were of the
view that the programme brought much needed investment to the distribution sector, which helped
them in building infrastructure, strengthening and up gradation of the network. This in turn resulted in
reduction of AT&C loss, DT failure rate, interruptions & outages and improvement in customer
satisfaction.
3.3.2 They were of the view that the distribution infrastructure was weak and that infrastructure building was
required initially in the distribution and that modernization activities can be taken up only after the
existing network was brought to a certain level. Utilities expressed that for the first 3 years of the
programme little would have been done, however from the third year onwards, a declining trend can
be noticed, which was in line with the Project Management Cycle. The new APDRP now needs to
focus on furthering this process so that a cascading effect can be achieved.
3.3.3 Further, APDRP also introduced reform in terms of new initiatives undertaken by various SEBs as also
unbundling of the Boards under the Act. Utilities pointed out that the APDRP was instrumental in
improving planning in the sector and that the thrust on the accountability brought commercial sense in
the working of the Utilities. The attempt through APDRP of setting up monitoring procedures through
MoAs and MoUs with the offices/officers of the SEBs has set a transparent process of monitoring of
the project site in place. This resulted in improvement in revenue collection, better quality of works
and reduced completion period for the schemes. The working culture had improved not only in the
towns covered under APDRP but enterprise wide as well.
3.3.4 The Utilities pointed out certain bottlenecks faced by them during implementation of the schemes. The
main bottlenecks were:
a. Delays in transfer of fund by the states- The Utilities were not able to get the required fund
timely creating a doubt on the availability of fund for making commitments. The delay ranged
from months to more than a year (see table 3.1). This was a major cause for delay in taking up
the implementation process.
b. Unrealistic DPRs The DPRs prepared in the beginning were not realistic due to lack of
experience/poor planning. The DPRs were prepared hurriedly without proper studies. No flexibility
in the scope of scheme was kept and therefore, scopes could not be modified to suit the site
conditions during implementation;
14
c. Delay in supply of equipments due to increased demand- The demand of the equipments
and the contractors suddenly increased due to funding under APDRP for which industry was not
geared up. It created a big gap in demand and supply, which delayed the implementation of the
schemes. The launch of RGGVY also made the situation difficult. Now, the industry is better
prepared to meet the demand.
Table: 3.1 Major Delays in Transfer of APDRP Fund
State Release by GOI Transfer by State to Utility
Andhra Pradesh April 02 J uly 03
Assam April 02 March 03
J anuary 03 March 04
Himachal Pradesh October 03 J uly 05
J harkhand April 02 March 03
March 04 February 05
Karnataka March 04 December 04
Madhya Pradesh J anuary 03 December 03
October 03 February 05
March 05 Not Yet
Maharashtra October 03 October 04
March 04 J anuary 06
Meghalaya October 03 August 04
Orissa April 02 March 04
March 03 May 04
Punjab J anuary 04 J anuary 05
Uttar Pradesh April 02 November 02
West Bengal April 02 February 03
d. Heavy quantum of work which Utilities were not geared up to handle- The Utilities were not
having sufficient manpower to handle the required quantum of work. The employees were also
not properly trained in the areas of project formulation, turnkey contracting, project management,
information technology etc.
e. Increase in price of materials/equipments- The increase in price of steel and cement resulted
in hike of prices of equipments, which delayed placement of awards.
f. Poor response to turnkey offers- The turnkey execution was generally not carried out in the
state Utilities earlier and therefore many turnkey contractors were not available in the distribution
sector. Therefore, the initial response was very poor. However, the situation was now better as
many turnkey contractors have developed during last 3 to 4 years.
15
g. Employees resistance to outsourcing- The Utility employees initially resisted outsourcing of
various activities feeling that it will result in privatization of the Utility. However, they realized later
on that only certain activities were being outsourced due to lack of manpower for increase
output.
h. Delay in finalizing IT road map for the Utility- The Utilities could not finalize IT roadmap for
long, which delayed taking up of IT related activities.
3.3.5 Responding on suggestion of Planning Commission, Utilities expressed:
a. That bifurcation of feeders was a fairly expensive project. While it has shown immediate results,
it would require that the component of funding for the project should go up substantially.
b. Baseline data preparation while it was of utmost necessity was not as readily available since
computerized systems were still under implementation and in very nascent form and will take
few to many years depending on the present stage in different Utilities.
c. Providing funds as debt to be later changed into grant may discourage most SEBs to take up
such projects and will cause confusion and adversely affect the motivation provided by the grant
component in the APDRP scheme. It may be better to begin with 50% debt and 50% grant (if at
all) and SEB benchmarks and evaluate performance at regular intervals. The grant component
should be increased based on enhanced performance.
3.3.6 The Utilities were of the view that the investment component of APDRP should be continued in the XI
Plan as it helped them in focusing on the need of strengthening and up gradation of their outdated
network besides bringing clarity towards need for efficiency improvement. However, they suggested
certain modifications in the programme for making it more effective. The main suggestions are
mentioned below:
a. More realistic targets may be fixed for reduction of AT&C loss. The targets should vary from
Utility to Utility depending upon their present status;
b. Utilities should indicate their detailed road map on achieving agreed benchmark parameters;
c. Utilities to finalize their business plan for the next 5 years;
d. Rural areas should also be covered under the programme. 25% of the investment fund may be
kept for rural areas.
e. The states may be classified in different categories on the basis of Rating Exercise and their
needs may be prioritized primarily in the areas of network expansion, system improvement &
strengthening and IT etc. and not as special/general category as at present.
f. States should reform in line with the objectives of APDRP.
g. The MoA for the restructured APDRP should be more realistic;
h. Monitoring may be done only on select Key Performance Parameters;
16
i. Maximum focus should be on reduction of AT&C loss, revenue realization, quality & reliability of
power through better customer service initiation;
j. The APDRP fund should be made available directly to the Utility;
k. Grant should be increased from 25% to 50% for general category states and from 90% to 100%
for special category states;
l. Fund for strengthening and up gradation of the network should continue;
m. Preparation of guidelines for project formulation and standardization of technical specifications
at national level;
n. Real Time Remote Automated Metering for all HT and LT bulk consumers;
o. Metering and energy auditing at all distribution transformers;
p. Consumer meters should be provided outside the consumer premises/ pillar boxes;
q. Adoption of spot billing for consumers;
r. 100% computerization of billing;
s. Adoption of Information technology;
t. Installation of capacitors on LT side of DTC;
u. Segregation of agriculture feeders;
v. Adoption of HVDS and ABC cables for reduction of theft;
w. Utilities should have flexibility for changing the scope of work during implementation of the
scheme;
x. Turnkey execution of the schemes for bigger works and departmental execution for smaller
schemes;
y. Performing Utilities may be allowed flexibility to adopt departmental implementation;
z. Short listing of suppliers at national or state level with common technical specifications;
aa. AcCs should help Utilities in introducing new technologies & techniques;
bb. Provision in the programme for Capacity building of Utility personnel, hiring of consultant, project
evaluation, third party quality assurance, Third party energy audit etc.;
cc. Incentive criteria should be simple. Govt. subsidy/tariff compensation should not be netted off
during calculation of incentive.
dd. Incentive criteria may be based on improvement in key performance indices and evaluated
through some independent agency;
ee. Incentive to be used for loss reduction activities.
17
Box-3.1: Suggestion of Utilities on Investment Needs in the Distribution Sector
Network Expansion: Will be primarily required by Utilities having very weak financial conditions
resulting in inability to attract commercial funds on their own
Network & System improvement: To reduce losses and improve quality. Will be primarily required
for Utilities with high AT&C losses, so that they can focus on achieving quick wins and move
towards faster financial turnaround.
IT and other support systems: Primarily for states who can attract commercial funds for their
basic and day-to-day requirements but need funds to support investments in areas which provide
benefits in the longer term and may not be immediately attractive to commercial lenders.
3.4 Views of Evaluators
3.4.1 The Ministry decided to take up evaluation of the programme during the course of implementation so
that if any mid term correction was required can be incorporated in the programme. Only those projects,
where more than 50% utilization was completed by that time, were taken up for evaluation in the first
phase.
3.4.2 The Ministry appointed IIM Ahmedabad, The Energy Resource Institute (TERI), ASCI Hyderabad, Tata
Consultancy Services and SBI CAPS in 2005 for evaluation of ongoing APDRP schemes. The reports
submitted by the evaluators were examined and observations made by them were noted. The Task
Force appreciated the initiative of the Ministry in institutionalizing a mechanism of 3
rd
party evaluation.
However, it felt that the evaluation report should be discussed with the Utilities and AcCs and their
feedback be used for making corrections in the DPRs, procedures of implementation and monitoring.
3.4.3 The evaluators observed that there were considerable improvements in the quality of DPR preparations,
awareness towards commercial aspects of the business, theft control and in respect of improvement
in metering, billing & collection efficiencies. However, they were of the opinion that there was scope of
further improvements. The evaluators recommended continuation of the programme beyond X Plan.
However, they suggested a number of conditions/initiatives, which may be made in the programme
and its guidelines, so that better results can be derived out of APDRP. The main suggestions were as
follows:
a. Direct release of APDRP fund to SEB / Utilities;
b. Concrete action plan with implementation strategy was required for the quick and fast
implementation of IT initiatives;
c. Adherence to reform conditions mentioned in the MoAs signed by the Utilities need to be further
defined in terms of specific milestones which must be strictly adhered to. Deadlines may be
chalked out for each milestone with the condition that funding would be stopped in case the
milestones were not met;
18
d. The DPR should be supported by historical data and reliable forecast of long term demand. This
will ensure that capacity planning was in line with expected load growth;
e. More attention needs to be paid to the preparation of realistic DPRs and these should be based
on proper system studies after looking at actual field conditions;
f. The Utilities may be given some flexibility to alter schemes;
g. There was need for providing detailed specification in the contracts / agreement to ensure quality
of material / equipment. Test certificates for major materials should be insisted and inspection of
equipment/ material has should be carried out at manufacturers works;
h. Undertake anti-theft measures more vigorously to curb commercial losses;
i. World class IT organizations should be Commissioned directly by MoP to drive the IT initiatives
in distribution sector;
j. Improving project management procedures reporting, risk management, project planning and
monitoring;
k. Outsourcing of project implementation on a turnkey basis to speed up implementation;
l. Improving the data quality and availability of MIS data in electronic format at the Circle offices;
m. Monitoring could be on fewer and more important parameters. Monitoring of APDRP should be
the key responsibility of SEBs / Utilities and not just the AcCs;
n. Third party assistance needs to be adopted for assessment of quality and progress;
o. Detailed audits need to be undertaken after completion of all the works to realistically assess
cost and time overruns (if any) and reasons for the same;
p. Cash incentive by the central government for better performing states should continue to motivate
them for improving their performance. However, calculation of the financial performance of
SEB/ Utilities should be simplified;
q. More emphasis on training of the Utility personnel.
3.5 Views of Ministry of Power
3.5.1 The Ministry of Power mentioned that APDRP was a part of six level intervention strategy and that a lot
of care was taken before launch of APDRP during 2002-03. The basic objective of the programme
was to provide much needed investment in the distribution sector with the expectation that it will
reduce the technical and commercial loss in the system. Keeping in mind that only investment (technical
intervention) will not be able to reduce the loss, Ministry had asked the Utilities to take administrative
and commercial interventions also at Utility level, town level, feeder level and at the consumer level.
The state Utilities committed these interventions through signing of Memorandum of Agreements
(MoA) with the Ministry.
19
3.5.2 Under the technical interventions focus was mainly on improvement of the existing network with priority
on feeder and consumer metering for taking up the energy accounting & auditing, which will result in
reduction of technical and commercial loss. The addition of new substations and lines was given low
priority. However, considering that bringing infrastructure at some basic level was first necessary,
many states decided to interchange the priority while implementing the schemes. Moreover, some of
the Utilities did not go for making use of the data available from the meters installed at various levels.
This though resulted in improvement in the quality and reliability of supply, however, the desired result
could not be achieved by such Utilities in respect of reduction in AT&C loss.
3.5.3 Under administrative interventions, Utilities were required to give more powers to the implementing
officers, make them more accountable and monitor the implementation of programme & benchmark
parameters. Some of the Utilities preferred not to change their working culture and were not able to
reap the benefits from these interventions adopted by states like Andhra Pradesh, Karnataka and
Gujarat etc. Close monitoring of the benchmark parameters like AT&C loss, average revenue realization,
and DT failure rate helped these states in overall efficiency improvement. The implementation of the
APDRP schemes was also faster in these Utilities due to close monitoring.
3.5.4 Under commercial interventions, Utilities were required to take up energy audits, adopt anti-theft
measures and adopt profit center approach. In accordance with the Electricity Act 2003, the states
were to establish special police stations and special courts to deal with electricity thefts. Only few
Utilities adopted these measures and they were able to get good results with degree of variance
depending on their efforts.
3.5.5 Ministry informed that the circle level projects were taken for implementation in the beginning of the
programme. However, based on Deepak Parikh Report for achieving quick results, the focus was
shifted to concentrated urban and industrial towns in the year 2003.
3.5.6 Ministry informed that 583 schemes were sanctioned under the programme progressively since 2002-
03. The implementation by many of the Utilities had been slow and very slow by few of them. States of
Andhra Pradesh, Delhi, Gujarat, Karnataka, Tamilnadu, Himachal Pradesh and Sikkim showed better
performance in implementation of the schemes and therefore, achieved better benefits.
3.5.6 The main reasons for the delay in implementation were the significant delay in transfer of fund by State
Government to the implementing Utilities, placement of orders, non-adoption of turnkey contracting,
lack in project management capabilities and poor monitoring by the Utilities. Poor response from the
suppliers/contractors also affected the progress in certain states specially NER states and J &K.
3.5.7 The Ministry had requested the Ministry of Finance for releasing of APDRP funds direct to the Utilities.
Ministry of Finance informed that APDRP being an Additional Central Assistance, funds can be released
only through the State. However, if the State agrees specifically, it may be done. Ministry took up the
matter with certain states, where the delay was significant, but they did not come forward for direct
release to the Utilities.
3.5.8 The Ministry was aware about the existing set up of procurement procedures of the Utilities and
therefore, it had asked the Utilities under MoA to set up separate organizational set up for APDRP
projects with increased powers with Superintending Engineers/ CEOs, to outsource certain activities
20
and to adopt turkey concept for implementation of APDRP schemes to facilitate timely and quality
implementation of the programme. However, most of the Utilities preferred not to amend their existing
system. However, after witnessing better implementation by some of the Utilities with turnkey system,
the adaptability of the turnkey concept increased with time and more Utilities switched over to part/full
implementation of APDRP schemes on turnkey basis.
3.5.9 The adoption of reforms by the states and Utilities was a major factor in the success of the programme.
16 states were yet to restructure their power sector. Four states were even yet to constitute the regulatory
Commissions. Few states like Arunachal Pradesh, Bihar, J harkhand, Manipur, Mizoram and Nagaland
were still having low feeder metering. Similarly consumer metering was at low level in the states of
Arunachal Pradesh, Bihar, Chattisgarh, J &K, J harkhand, Karnataka, Madhya Pradesh, Maharashtra,
Manipur, Meghalaya, Nagaland, Orissa, Nagaland and Tamilnadu. Many Utilities were yet to take up
the metering of distribution transformers, which was essential for carrying effective energy accounting
& auditing.
3.5.10Management Information System (MIS) was still at low level in many of the states. Ministry emphasized
that the desired results can not be achieved through APDRP in isolation, as it was only a part of six
level intervention strategy. States should adopt reforms in right perspective for the desired results in
the sector.
3.5.11Ministry was of the view that the implementation of the schemes was in advanced stage in few states/
towns and the results can be expected from them only and not from the whole state or country. Out of
583 projects sanctioned, work in 151 towns has been completed more than 75%. Additional 120 towns
have reported completion above 50%. Work in 97 towns was in between 30% and 50% and in 98
towns between 10% and 30%. 39 towns have reported utilization below 10%, while work on 78 schemes
was yet to take off.
3.5.12The Ministry informed that AT&C Losses have been brought below 20 percent in 212 APDRP towns
(A.P.-96, T.N.-36, Karnataka-31, Punjab-11, Gujarat-11, Chattisgarh-2, H.P.-6, Maharashtra-8, Kerala-
4, Rajasthan-3, M.P.-1, Goa-1, Tripura-1) in the country of which 169 towns have brought AT&C losses
below 15 percent. It was mentioned that results would have been better if State Departments were
paying their electricity dues especially for water pumping and street lighting.
3.5.13Similarly DT failure rate below 5% has been reported by 215 towns, out of which 71 have reported up
to 1% (AP-28, Gujarat- 01, Karnataka-02, Kerala-27, MP-04, Maharashtra-01, Rajasthan-02, and
Tamilnadu-06).
3.5.14The overall commercial loss (without subsidy) of the Utilities reduced from Rs. 29,331 Crore during
2001-02 to Rs. 22,129 Crore during 2004-05. Though, the major states reported reduction in commercial
losses during 2004-05, some of the sates namely J harkhand, Assam, Haryana, Punjab, Rajasthan,
Tamilnadu and Uttar Pradesh reported heavy increase in the loss during the year.
3.5.15The Ministry informed that these results were based on the data up to the financial year 2004-05 and
that better results were expected during 2005-06 for which the data was at compiling stage by the
Utilities as the implementation of APDRP schemes achieved significant progress during the previous
year. The Ministry observed that it was quite early to expect very high results from the programme as
21
only few of the schemes sanctioned under APDRP were at completion stage. Moreover, the results
from the programme can be expected from towns only where the schemes have been taken up and
not at Utility level especially in the light of states not adopting reforms and making the power free for
select categories. It will be better to review the programme only when considerable amount of fund
was utilized.
3.5.16The Ministry observed that concept of AT&C loss was now embedded in the working of the Utilities.
They were now better prepared for project formulation, implementation of projects, project management
and monitoring of the benchmark parameters.
3.5.17Ministry observed that most of the suggestions as given by the evaluators and planning Commission
were already built in the programme. The question was the proper implementation of them by the
Utilities and desired support from the state Governments. There were some contradictory suggestions
also from various agencies like more flexibility/strictness in implementation of the schemes by the
Utilities. Utilities still feel that capacity augmentation should be given more priority in comparison to
loss reduction activities. Whereas, Ministry and the Planning Commission want that loss reduction
measures should be given the priority. Ministry was of the view that grant provided by the Government
should be used only for the loss reduction measures and for measures towards improvement in
consumer satisfaction. The counterpart fund may be utilized for capacity augmentation.
3.5.18Responding on the availability of APDRP funds to the private Utilities, Ministry observed that the
investment assistance should be extended to them. In accordance with the APDRP conditions, all the
Utilities were to pass on the benefits received under the programme to the consumers through regulatory
mechanism. Better services to the consumer were one of the objectives of APDRP and that there
should not be any differentiation between consumers covered under public or private Utility. Ministry
also supported provision of the incentive against the cash loss reduction by the private Utilities. However,
it was of the view that the incentive should be given to the state and not to the utility. It will motivate the
states to privatize the distribution sector.
3.5.19Supporting the views of the AcCs, Ministry felt that the Utilities should prepare tenderable DPRs and
should be ready for issuing NITs as soon as the scheme was sanctioned by the Ministry. The scheme
implementation should be taken up on turnkey basis only. Utilities should have a quality assurance
programme in advance. Key Performance Indicators (KPIs) at initial level and targets should be identified
at the time of project preparation and should be clearly mentioned in the DPRs. These KPIs should be
monitored regularly at the Utility level and verifiable by third agency. If Utility fails to achieve the targeted
KPIs, the grant should be converted into loan.
3.6 Views of Central Electricity Authority
3.6.1 Investment assistance should be provided to the private sector as the assistance will get passed on to
the consumer and not remain with the utility itself. The assistance would be reflected in the Annual
Revenue Requirement of the Utility and the Regulators would be ensuring that the benefit of the same
is passed on the consumers of that Utility. It would not be justified to deprive the consumers of a
particular area just because Distribution Company supplying to them has been privatized.
22
3.6.2 The incentive component may not be provided for the Private Utility. In case incentive is to be given,
then it could be considered that the incentive component is given to the STU supplying to those
DISCOMs.
3.6.3 Since the objective of APDRP is Accelerated Power Development and Reform of the utilities, raise of
the grant component to 50% would be helpful to the Utilities in speedy completion of their project. Till
date only 32 projects have achieved 100% utilisation and 30 projects have achieved more than 90%
utilization out of a total of 583 projects sanctioned during 10
th
plan. This has been because the loan
absorption capacity of the utilities is low. However, the release of funds under the grant component
could be linked to achievement of milestones, failing which it would result in suspension of funds.
3.6.4 It has been observed that some of the Utilities are utilizing APDRP funds for O&M works in place of
loss reduction programme. In fact some of the States have stopped all other expenditure in the
Distribution Sector and rely totally on APDRP. It needs to be ensured that the States earmark a
percentage of their outlay of power sector for Normal Development and O&M expenditure in the
Distribution Sector.
3.6.5 Execution of all process on turn key system may not be possible in States like J &K where getting
adequate numbers of tenderers was very difficult. In such States the choice of going in for turn key
projects or executing on departmental basis should be left to the Utility.
3.6.6 Since the cost of raw materials like steel has gone up it is felt that 20% variation in cost & 15% variation
in quantities with the approval of ACC should be allowed.
3.6.7 The standard specification for all equipment and standard bidding documents should be made available
to all the power Utilities as early as possible to expedite implementation of APDRP projects.
3.6.8 It has been observed that the data on which the report is prepared is generally not firm and this causes
difficulties in implementation and assessment of improvement of the system. In all new schemes,
funds should be made available on firming up base line data. It has been seen that once the works are
constructed under APDRP, the Utilities do not have the required staff and funds for maintaining the
system. It should be mandatory that adequate staff will be posted at the 33/66kV sub-stations being
created under APDRP.
3.6.9 Incentive to the employees of a Utility achieving cash loss reduction should be considered.
3.6.10Proposals for technical loss reduction should also be considered for funding under APDRP. These
proposals should be prepared on the basis of system studies.
3.7 Views of Ministry of Finance
3.7.1 The need for continuation of APDRP in the Eleventh Plan may be explicitly brought out. Interest
subsidy may be provided in lieu of Central assistance flowing in the form of the Investment Component
in the present version of APDRP.
3.7.2 Unbundling and yearly tariff revisions and its approval by the regulator be made a pre-condition for
availing any kind of assistance under APDRP as provided in the Electricity Regulatory Act.
23
3.7.3 While the incentive component may be continued there should be a provision to recover the same
from the State Utility in case of deterioration in financial performance.
3.7.4 We Support competitive procurement of inputs for the power sector and endorse the need to factoring
out the hidden costs of uncompetitive purchases from the State owned generation companies while
computing loss reduction for incentive payments.
3.7.5 As long as APDRP is in the State Sector, funds will continue to be released by MOF to the State
Government for passing on the same to the utilities.
3.7.6 Each State must work out its turnaround plan with annual target for each segment of the Power business.
Further, MOF should be a part of the regulatory / approval process for project selection so as to ensure
that only those States whose projects are in conformity with the turnaround plan are finally selected
and funded to their successful completion.
3.7.7 It did not agree to extend investment support to the private utilities under the programme. It also did
not agree to the enhancement of the grant component under the programme from 25% to 59%.
***
Meter Pillar Box
24
11 kV Tr. Line
Emergency Breakdown Vehicle
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4.0 Observations
The APDRP was launched by the Ministry of Power for implementing six level intervention strategy in
2002-03. The Task force observed that the Ministry had evolved a six level intervention strategy to
bring about commercial viability in the electricity distribution sector. Under the strategy, steps were
required to be taken at National, State, SEB, Circle/town, feeder and at Consumer levels.
4.1 National Level Interventions
4.1.1 The Task Force appreciated the initiatives taken by the Ministry at national level. The Government has
notified Electricity Act 2003, National Electricity Policy in 2005 and Tariff Policy in 2006. Guidelines for
encouraging competition in development of transmission projects and competitive bidding for
transmission service have also been issued. The technical specifications for various equipments for
distribution system were also got prepared through NTPC and POWERGRID and circulated to the
states for adoption.
4.1.2 The Ministry of Power also constituted an IT Task Force headed by Shri Nandan Nilekani, CEO Infosys.
3.1.4 The IT Task Force suggested a 3 to 5 year roadmap with both short term and long term IT
initiatives for the state power Utilities for improvement in their efficiency. For short term IT interventions,
it recommended that priority should be given to the use of IT in commercial processes and in improving
the quality of supply in selected high revenue areas. The key objective of the IT solution should be to
minimize human interface in commercial processes to avoid human errors and chances of willful
mistakes. Having started on the short term quick win areas, long-term areas would cover business
processes. For instance, billing could be expanded to cover all customer types and grown into a
comprehensive customer information system (CIS) and gradually the sophisticated call centre
functionality can be added. IT Task Force also recommended that the Utilities should also have an
effective MIS for decision support and improved decision making.
4.1.3 The Task Force took a note of efforts being made by the Ministry in propagating best practices in the
power distribution system. As the Ministry has decided to make it an annual review, it will go a long way
in helping the Utilities in identification and adoption of the best practices for improvement in their
performance. States should also take such initiatives at their level to take benefits from such initiatives.
4.1.4 The initiatives taken by the Ministry for training of the Utility employees were appreciated by the Task
Force. It was of the view that the training should be given higher priority in the restructured APDRP to
cover every employee involved in the distribution sector.
4.1.5 The Ministry of Power made signing of Memorandum of Agreement (MoA) a pre-condition to the
Utilities for becoming eligible for APDRP assistance. This MoA contained various steps which were to
be taken by the states/Utilities under six level intervention strategy at National, state, Utility/SEB, town,
feeder and at Consumer levels.
CHAPTER 4: OBSERVATI ONS OF THE TASK FORCE
26
4.1.6 The Ministry appointed CEA, NTPC, POWERGRID, CPRI, NPC and MECON as advisor cum Consultant
for helping the State Utilities in planning, preparation of DPRs, capacity building, project implementation,
monitoring etc. The Task Force observed that the Advisor cum Consultants have also played a vital
role in the planning, implementation and monitoring of reforms and APDRP. It was of the view that
AcCs should help the Utilities in finalizing their long term plans, standardizing their technical
specifications, tender documents, procedures for implementation and monitoring, training needs etc.
4.1.7 Central Electricity Authority, NTPC and POWERGRID have started monitoring of outages and Reliability
of supply. This resulted in awareness and monitoring at the working level in the Utilities, which was
resulting in better reliability of power supply and improved consumer satisfaction. The Task Force
appreciated the concept of reliability index and observed that there was a long way in achieving the
methodology of international level. At intermediate level, CEA will have to strengthen its monitoring
procedures and make the public aware about the reliability parameters through print and media. It
Box-4.1 MOA Conditions
Administrative Interventions
Constitution of Distribution Reform Committee
Identification of nodal Officer
Policy of handing over D/S to franchise etc
Accounting of Input Power
Policy for out sourcing
Setting up of Benchmark parameters
MOU between Utility & CEO and down below
Organization structure for implementation of APDRP projects
Designation of Feeder Manager
Commercial Interventions
Energy Accounting & Auditing
Computerised billing
Turnkey contracting system
Installation of Feeder meters
Installation of consumer meters
New connection with meters
Technical Interventions
Installation of capacitor above 5 HP
Consumer indexing up to DT level
Sub-Station level interface for automatic data logging
Setting up of consumer complaint system
27
observed that Reliability index will be the ultimate analysis and the best indicator of consumer
satisfaction.
4.2 State Level Interventions
4.2.1 At state level, SEBs were to be restructured and corporatised and SERCs were to be constituted for
rationalization of tariffs. However, SEBs in only 13 states have been restructured till now. States of
Assam, Andhra Pradesh, Delhi Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Tripura and Uttar
Pradesh segregated their distribution companies so far. Task Force observed even after restructuring,
the functional autonomy was still not available to the restructured entities in some states. It also observed
that some of the states were repeatedly asking for extensions for restructuring their SEBs even after
Electricity Act 2003. Some of the states appear to be reluctant to restructure the SEBs
4.2.2 The Task Force observed that progress in respect of constitution of SERCs was better as 25 states
have constituted the Commissions, out of which 20 have become functional. Status of reforms is
shown at Annexure-V.
4.2.3 It was observed that the performance of the Utilities was much better in states where there was
commitment for reforms in comparison to other states. It is therefore necessary that the other states
should also follow the reform path.
4.3 SEB Level Interventions
4.3.1 At SEB level, the Utilities were to reorganize the set up for quick implementation of the projects and to
take various policy measures. Superintending Engineers were to be designated as CEOs and entrusted
with more powers. Inter-Utility MOUs were to be signed to achieve set targets on bench mark parameters.
The Task Force observed that there was mixed achievements on these interventions. The Utilities, like
Andhra Pradesh, Gujarat, and Karnataka etc. adopted feeder manager approach to make the field
level officer accountable and through monitoring of their performance, achieved very good results in
the form of higher revenue collection, low losses and improvement in other KPIs.
4.3.2 It was noted that the annual accounting system in most of the restructured Utilities has improved. The
incentive scheme has motivated the SEBs to finalize their annual accounts early for filing their incentive
claims. However, few Utilities like BSEB & J SEB were still lacking in this respect. States having Power
departments such as Arunachal Pradesh, J &K, Mizoram and Nagaland were also lacking in accounting
practices.
4.3.3 The Task Force noted that the monitoring of implementation of the schemes and achievements on
benchmark parameters at the Utility level has improved to great extent and the management has
started close monitoring of the performance at micro level. However, much was still desirable in some
of the Utilities. The Task Force felt that the investments sanction process should actually be looked
into short falls under the promised milestones.
4.3.4 The Task Force observed that trend in increase in commercial losses of the Utilities has not only been
arrested but now it was on a downward trend at the National level. However, it felt that one can not be
complacent about it and that lot of efforts was required by the Utilities, Regulators and State Governments
28
to maintain present trend of reduction in commercial losses. The details of commercial losses of the
Utilities are shown at Annexure-VI.
Fig-4.1 Commercial Loss of Power Utilities without Subsidy (Rs. in Crore)
4.3.5 The reduction in theft and pilferage of power was an important activity Utilities had to undertake towards
reducing AT&C loss and achieving the commercial viability. Some of the states have taken advantage
of the provisions of Electricity Act 2003 and have established special courts and police stations and
were able to effectively control theft and pilferage. However some of the states have not acted upon
this aspect. They have failed to establish special police stations and special courts and were not able
to deal effectively with power theft cases. It was an indication of the interest these states have towards
the problem (see Box- 4.3).
Box-4.2 Improvement in Commercial Loss of the Utilities
The commercial losses (without subsidy) of State power Utilities reduced from Rs. 29,331
Crore in 2001-02 to Rs. 19,722 Crore during 2003-04. However, it increased to Rs. 22,129
Crore during 2004-05. Though, power Utilities in Andhra Pradesh, Delhi, Gujarat, H.P.,
Karnataka, Kerala, Orissa, Pondicherry, Sikkim and West Bengal showed considerable reduction
in their losses during 2004-05 over previous year, Utilities in Assam, Bihar, Haryana, J harkhand,
Punjab, Rajasthan, Tamilnadu and Uttar Pradesh increased their losses considerably. during
the year. These states were together responsible for increase of commercial losses to the
extent of Rs. 4972 Crores during 2004-05.
29
4.3.6 It was observed that few Utilities have now started taking various technical interventions in curtailing
theft and pilferage of power, which include remote metering of bulk consumers, placing meters outside
consumer premises, adoption of HVDS, ABC/XLPE cable, energy auditing etc. These measures have
been reported to be very effective. The Task Force felt that consumer indexing based energy auditing
should be made an essential part of each scheme and implemented on priority along with above
measures.
4.3.7 It was observed that most of the Utilities have started establishing computerised billing and many of
them were now using spot billing machines. Automatic meter reading has been started by many states
for bulk consumers. This has resulted in better billing and improved revenue realization and improved
consumer satisfaction
4.4 Circle/Town Level Interventions
4.4.1 At the town level, Utilities were required to reduce AT&C loss, outages and improve reliability. The Task
Force observed that reduction in AT&C loss has been reported in most of the towns where APDRP
work has been considerably completed. AT&C Losses has been brought below 20 percent in 212
APDRP towns in the country, of which 169 towns have brought AT&C losses below 15 percent. It is
however observed that these losses have been brought down below 15% in few towns only in few
states. The Task Force felt that there was considerable scope of reduction of the losses at town level
and the focus of the Ministry and the Utilities should be kept on the same.
Box 4.3 Measures by States for Prevention of Theft of Electricity
Sl. STATE SPECIAL COURTS SPL. POLICE STATIONS
1 Assam Yes
2 Andhra Pradesh Yes
3 Chattisgarh Yes
4 Delhi Yes Yes
5 Gujarat Yes Yes
6 Himachal Pradesh Yes
7 Karnataka Yes Yes
8 Madhya Pradesh Yes
9 Maharashtra Yes
10 Orissa Yes Yes
11 Rajasthan Yes Yes
12 Tripura Yes
13 Uttar Pradesh Yes
14 Uttaranchal Yes
15 West Bengal Yes Yes
30
2.2.2 The Task Force also observed reduction in failure of distribution transformers by most of the Utilities.
It was of the view that with the implementation of bifurcation and renovation of feeders and substations,
the DT failure rate is expected to go down further.
4.5 Feeder Level Interventions
4.5.1 At feeder level Utilities were required to achieve 100% metering and start energy accounting & auditing
and improve reliability of power supply. Task Force noted that at national level about 96% of the
feeders have been metered and 4% were yet to be metered. Details are shown at Annexure-VII. The
energy accounting was being done by most of the states. However, energy auditing was at initial level
in most of the Utilities and some of the states have yet to take steps in this direction. Based on the
presentations made by the Utilities, it was observed that such of the feeders, where augmentation has
been done and the energy accounting has started, outages have reduced and significant improvement
has been achieved in respect of AT&C loss and DT failure rate.
4.6 Consumer Level Interventions
4.6.1 Interventions at consumer level were towards metering, better billing & collection efficiency and improved
consumer satisfaction. Overall 92% consumer metering has been achieved at national level against
78% during 2001. Details are at Annexure-VIII. The metering of agricultural consumers has not been
taken up by most of the states even after various promises under MOU and MOA. A resolution for
metering every consumer was also adopted in the conference of the Chief Ministers in 2001 and this
has been made essential by the Electricity Act 2003 also, but few of the states were yet to act in this
direction. Task Force was of the view that it will not be possible to reduce the technical as well as
commercial losses without metering each and every consumer, smaller or bigger. It felt that the metering
of agriculture consumers was very sensitive and Ministry of Power will be required to take the matter
with Planning Commission, State Governments and Regulators.
4.7 APDRP Targets
4.7.1 APDRP had targeted reduction of AT&C loss from 60% to 15% in about 5 years time. Utilities were of
the view that this target was very ambitious and not realistic. It was observed that the figure of 60%
Box- 4.4 Reduction of AT&C Loss below 15% in APDRP Towns
Andhra 96 towns Tamilnadu 36 Towns
Karnataka 31 Towns Punjab 11 Towns
Gujarat 11 Towns Himachal 06 Towns
Maharashtra 08 Towns Kerala 04 Towns
Rajasthan 03 Towns Chattisgarh 02 Towns
M. P. 01 Town Goa 01 Town
Tripura 01 Town U.P. 01 Town
31
loss during 2002-03 would not have been correct as the sufficient and reliable data was not available
with the Utilities at that time. As per the data compiled by the Ministry, AT&C loss for 2001-02 of the
state power distribution Utilities at national level was 38.86%, which came down to 33.82% during
2004-05. This shows that AT&C loss of 5.06% was reduced during three years, i.e. 1.68% reduction
per year as against a target of 9% per year. The achievement can not be considered as small as the
actual implementation of the programme started quite late due to delay in preparation of the projects
by the Utilities and then in the implementation of the sanctioned schemes. It shows that out of about
514 BUs of energy available for sale in 2004-05, about 26 BUs of extra energy was saved/realised
amounting to realization of Rs. 6500 Crore by the Utilities (@Rs. 2.50 per unit).
4.7.2 Based on provisional accounts for 2005-06 states of Andhra Pradesh, Goa and Tamilnadu have reported
AT&C loss below 20% during the year. Punjab and 2 DISCOMs of Gujarat (Madhya & Uttar) have
reported AT&C loss in between 20% and 25% during 2005-06. Further, Utilities in the states of Andhra
Pradesh, Goa, Himachal Pradesh, Punjab, Gujarat, Meghalaya, Chattisgarh & West Bengal have
reported profits during 2005-06. States of J harkhand, Madhya Pradesh, Haryana, Rajasthan,
Uttaranchal, Karnataka, Kerala and Assam have also reported reduction in their losses during 2005-
06 in comparison to the previous year.
4.7.3 The Task Force appreciated that reduction of AT&C loss below 15% has taken place in 169 towns and
below 20% in 43 towns and observed that it has happened mainly in 3 states. It will require big efforts
on the part of states and Utilities to bring down AT&C loss at Utility and town level below 15%. The Task
Force specially appreciated the efforts of Andhra Pradesh in achieving AT&C loss below 20% at the
Utility level.
32
4.7.4 The Task force observed that the improvement in billing and collection efficiency has taken place in
most of the Utilities. The improvement looked to be more impressive, if it is considered that the energy
handled during the period increased from 422 BUs to 514 BUs during the period. The trend of sell
more lose more has reversed, which should be appreciated. While analyzing the collection efficiency
of the Utilities, Task Force did observe that payments of the electricity dues by Government Departments/
local bodies impacted the revenue collection by the Utilities, which was to the tune of 4 to 5% and
affecting on the same level of the AT&C loss. Task Force felt that a mechanism needs to be evolved,
whereby the Government Dues are paid timely.
4.7.5 It was observed that the income of the distribution Utilities have improved appreciably during last
3 years. The loss as percentage of turnover has been reduced by about 16% during 2004-05 in
comparison to 2001-02.
Table 4.1 Loss of Utilities as percentage of turnover
Year Revenue Loss Rs. Loss %
( w/o subsidy) (w/o subsidy) of turnover
Rs. in Crore in Crore (w/o Subsidy)
2001-02 80250 29331 36.55
2002-03 88243 21193 24.02
2003-04 98152 19722 20.09
2004-05 106881 22129 20.70
4.7.6 The Task Force noted that the subsidy booked to the revenue sale has also shown considerable
reduction during past years.
4.7.7 The Task Force was of the view that the evaluation of the actual benefits towards encouragement for
use of more efficient equipments/appliances in terms of improvement in quality and reliability of supply,
as mentioned at the time of Government approval of the programme, should be based on case to case
basis. A separate study will have to be taken up by the Government on this aspect after sufficient work
is completed under the programme.
Box 4.5 Improvement in Billing and Collection Efficiency
The billing efficiency improved in almost all the Utilities (except in Bihar, J harkhand, J &K, Uttaranchal
and Chattisgarh). The billing efficiency at national level increased from 68.12% during 2001-02 to
69.87% during 2004-05. Similarly, collection efficiency improved in most of the Utilities (except for
CESCO, Manipur, Uttar Haryana, Ajmer Nigam/Rajasthan, UP DISCOMs, Hescom/Karnataka and
M.P.). The collection efficiency of the distribution companies at national level also showed significant
improvement during the same period from 91.78% to 94.72%. Details are shown at Annexure-IX.
33
4.8 APDRP Implementation
4.8.1 It was observed by the Task Force that majority of the APDRP projects were sanctioned during 2002
and 2003. However, only few states took prompt action towards quick implementation of these projects.
It was noted that the projects sanctioned during 2002 have been completed around 60% even after
expiry of more than 3 years. The states were yet to start implementation of the projects sanctioned in
August 2005. From the details, it was seen that only 32 projects have achieved 100% utilization and 30
more projects have achieved more than 90% utilization.
4.8.2 It was observed that there has been delay in implementation of the APDRP projects. Though, there
could be many reasons for delay as presented by the Utilities, AcCs and the Ministry, the Task Force
observed that most of these delays could have been avoided, if projects were prepared based on good
planning through new technologies. Hence, there was a need of better planning, data management,
project management and monitoring. The Task Force observed that, if, the Utility plans properly, a
period of 24 to 30 months can be the sufficient period for any town to implement the scheme after
sanction and to bring down its loss below 15%.
4.8.3 The Task Forces noted the observation of CEA that in some states the Utilities diverted funds under
this scheme for their normal O&M work and it has felt that this should not be allowed.
4.8.4 The Task Force observed that the Utilities, which executed CAT-A schemes, derived better results,
though, CAT-B schemes were also necessary. The Task Force realised that the augmentation of
distribution network through loans from financial institutions should be differentiated from works seeking
assistance under APDRP.
4.9 APDRP Incentive
4.9.1 The Task Force observed that incentive was a big motivating factor for the Utilities for reducing their
losses through efficiency improvements. It noted that some of the states, which took the incentives
earlier, could not take up the incentive again. This would indicate that the Utilities are not consistent in
their performance which needs to be analyzed and corrective measures taken.
4.9.2 It was observed that the incentive released by the Government to states, as made out in the presentations
Box 4.6 Main reasons for delay in APDRP Project Implementation
i. Delay in formulation of the project by the Utilities due to lack of basic data and lack of
experience in preparation of bankable DPRs;
ii. Delay in preparation of technical specifications and tender documents;
iii. Delay in awarding the contract;
iv. Delay in transfer of APDRP fund from State Government to the Utilities;
v. Frequent transfers of the implementing officers at the Utilities;
vi. Right of way problems for new transmission lines and delay in acquisition of land for new
substations;
vii. Lack of project management capabilities of the Utility;
viii. Non-availability of required equipments and contractors in the market due to high demand;
ix. Increase in prices of equipments and raw material;
x. Legal cases and law & order problems for some states.
34
made by the Utilities, was not being fully transferred further to the Utilities. Though, the APDRP guidelines
specify that the incentive fund should be utilized for improvement in the power sector only, the states
preferred not to comply with this condition. Utilities were of the view that the incentive amount should
also be released to the Utilities directly. The Task Force felt that the Ministry should review the utilization
of incentive amount in the power sector and if it was found that the incentive has been diverted, the
same may be recovered from the state.
4.9.3 It was observed by the Task Force that though many of the Utilities have reduced their commercial
loss but only few of them achieved reduction in cash losses. The main reasons for not achieving the
cash losses reduction were for supplying free power for agriculture sector, inadequate subsidy in form
of tariff compensation and increase in receivables. During the deliberations, Utilities advocated for
considering tariff compensation as the revenue earned, whereas Ministry of Power and Ministry of
Finance were of the view that this will again lead to increased state interference in the sector. Trend
indicates that tariff compensation by the states to Utilities was increasing, which will result increase in
financial burden on the states. They submitted that main objective of the power sector reforms was to
reduce burden on the Government and that subsidy & tariff compensation by the state should not be
encouraged by accounting them as revenue for calculation of incentive.
4.10 General Observations
4.10.1The Task Force observed that the APDRP was still at initial stage as only projects of Rs. 19180 Crore
were sanctioned and Rs. 9730 Crore was utilized till May 2006 against targeted amount of Rs 40,000
Crore under investment component (including counterpart fund). The Task Force was of the view that
the full benefits of the programme can not be expected at this stage and that the assessment of
benefits from the programme should be made after covering all the district headquarter towns at least
and when sufficient work has been completed.
4.10.2The Task Force was of the opinion that the Utilities should invest in the distribution sector on its own
also as being done in generation and transmission. It was of the view that the creation of new networks
by the Utilities should be in accordance with the best practices to ensure that it do not add up more
loss in the system.
4.10.3It was noted by the Task Force that the close monitoring adopted by the Ministry since launching of
APDRP has brought a culture of monitoring in the Utilities. The Utilities accepted that better MIS was
being maintained by them and the monitoring of performance parameters was being done at every
level. This brought better accountability at various levels in the Utilities.
4.10.4It was observed that the Ministry was getting the evaluation done from the independent evaluators in
phases for assessing the benefits and shortcomings of the programme. One such evaluation has
already been completed for those projects, where more than 50% work had already been completed
and another was under progress. These evaluating agencies have appreciated the role of APDRP and
have recommended continuation of the programme.
4.10.5The Task Force, in light of the presentations made by the Utilities, agreed with the comments of the
evaluators that it was an early stage for evaluating such a big programme as it was at its initial stage of
implementation. It was a good initiative but should be undertaken after higher level of implementation
to say above 75% utilization.
***
35
5.1 Continuation of APDRP
5.1.1 The committee felt that APDRP brought much needed investment in the distribution sector and
brought the focus on reduction of loss and improvement in the consumer services. The Utilities
were of the view that as the investments required were of high magnitude the grants under APDRP
helps them to focus their attention on loss reduction etc. and therefore the programme should be
continued. The programme also created an impact on overall working of the state power Utilities.
The programme has been instrumental in bringing business like approach in the sector and helped
the Utilities in reducing their losses and in bringing about cultural change resulting in improvement
of their overall performance. It was felt that though Utilities realised the necessity of reforms, but it
would not have been possible for them to adopt the reform path without a motivating factor, which
came in form of APDRP. The close monitoring by the Ministry of Power also helped the Utilities in
effective implementation of the programme and focus on loss reduction. The deteriorating trend in
the condition of distribution services has been reversed and many of the Utilities were now in a
position of promising better services to the customers. However, there was a long way to go.
5.1.2 The Committee recommends that the programme should be continued beyond the tenth plan but with
revised conditionalities mentioned under eligibility criteria in the report.
5.2 Eligibility Criteria for APDRP assistance
The Task Force was of the view that if the sector was to be made commercially viable the States and
the Utilities need to reform at a brisk pace. Even after elapsing of sufficient time since the states made
commitment under MoA, many of the conditionalities were yet to be fulfilled by them. The Government
should review the MoA conditions in the perspective of Electricity Act 2003 and redefine primary and
secondary reform activities and fix reasonable but firm targets for the States & Utilities for implementation.
5.2.1 Conditions for Investment Assistance under APDRP
a) Primary Conditions: The States should fulfill the following conditions to become eligible for assistance
under APDRP:
i. Restructuring of SEB/Power Deptt.
ii. Constitution and operationalisation of SERC;
iii. Establishment and operationalization of special courts and police stations under anti-theft
provisions of the Electricity Act 2003.
b) Secondary Conditions: The States/Utilities should commit time frame for achieving the following
targets, if not already achieved. The time frame for meeting targets for these conditions should be
Utility specific depending on their present status, which may be fixed by the Ministry in consultation
with the respective Utilities, based on audited data.
i. Finalization of Roadmap/Financial Restructuring Plan approved by the Regulator and State
Government;
ii. Adoption of Multi-Year Tariff;
iii. 100% system metering up to 11 kV feeders;
iv. Energy accounting and auditing;
v. 100% metering of non-agriculture consumers in the Utility;
CHAPTER 5: RECOMMENDATI ONS OF THE
TASK FORCE
36
vi. 100% metering of consumers including agriculture consumers in the APDRP covered areas;
vii. Establishment of consumer care centers in all the district towns.
5.2.2 In case, some states were not ready to commit these targets, such States may be debarred from
APDRP and other central assistances including RGGVY assistance, additional power allocations etc.
In case some of the states fail to fulfill these conditions after committing the reform targets, further
assistance under the programme and any other programme of the Central Government be stopped till
they achieve their targets.
5.2.3 Conditions for Incentive Assistance under APDRP
The APDRP assistance should be made available to the Utilities under incentive component only after
they achieve following conditions:
a) Restructuring of the SEB/Power Deptt. has been completed;
b) Constitution and operationalisation of SERC;
c) Timely Filing of ARR.
5.2.4 Though, some states expressed that restructuring may not be made a condition for incentive, Task
Force was of the view that restructuring being a major reform activity under the Electricity Act, states
should undertake restructuring of SEBs / Departments.
5.2.5 The Task Force was of the view that merely constituting SERC does not help till it start its operation by
way of finalization of ARR/tariff petitions of the Utilities in the state. As without that objective of
rationalization of tariff could not be acghieved. Therefore, operationalisation of SERC would be essential
in the state to become eligible for claiming incentive.
5.2.6 APDRP being a programme basically for improvement in distribution sector, performance of only
distribution companies should be considered for calculation of incentive. The performance of each
distribution company should be considered separately. Generating and transmission companies should
be kept out of the purview for incentive calculations.
5.3 APDRP Assistance to Private Utilities
The provision of APDRP assistance to the private power distribution Utilities was discussed in detail.
Some members were of the view that some States have gone in for privatization in the joint sector
mode of 49% of equity for the states and 51% equity to the private sector due to lack of investable
resources, improving efficiency or attracting investment into the sector. This was achieved in a
transparent manner. Under these circumstances some members opined that the private Utilities
should also be covered under the programme as the consumers under private Utilities should not be
deprived of the Government assistance specially as the benefit will necessarily be passed on to the
consumer through a reduced tariff. The denial of the scheme could adversely affect the consumers in
the areas that have come under private management.
5.3.1 However, some members have argued that the private bidder would have taken into consideration the
existing losses, extent of capital expenditure required and accordingly would have committed to a
planned reduction of losses and accounting also for the expected return on equity. Under such
circumstances the investment component needed for Utilities which do have a poor excess to markets
cannot be made available to private sector who have better access to the market.
37
5.3.2 Keeping in view the long term perspective, Task Force recommends that APDRP investment assistance
should be extended to the private Utilities also, as the ultimate beneficiary of the assistance under the
programme was the consumer. It may however be ensured that the assistance received by them was
properly reflected in the Annual Revenue Requirements filed with the Regulatory Commissions.
5.3.3 The Task Force also recommends that the private Utilities should also be covered under APDRP
incentive programme. However, the incentive should be paid to the State government with the condition
that it will be used for development in the state power sector only.
5.4 Objectives of APDRP
The objective of the APDRP should remain on the similar lines and should target towards the commercial
viability of the Utilities by reducing their AT&C losses, improvement in quality & reliability of supply and
improvement in consumer satisfaction.
a) AT&C Loss Reduction Targets
The Task Force examined the targets set for AT &C losses reduction and after taking into consideration
experience of the Utilities felt that the targets should be recast in a manner that they are realistic and
achievable based on the present level of AT&C losses in each State. Accordingly the Task Force
recommends the following targets depending on their present level of AT&C losses :
i) Utilities having AT&C losses above 40%: Reduction by 4% per year
ii) Utilities having AT&C losses between 30 & 40%: Reduction by 3% per year
iii) Utilities having AT&C losses between 20 & 30%: Reduction by 2% per year
iv) Utilities having AT&C losses below 20%: Reduction by 1% per year
The targets will change from one slab to another on shifting of the AT&C losses from one level to
another level.
b) Reliability Index
The Utilities should improve consumer services by increasing reliability of supply, reduction in outages
and tripping. To start with these parameters may be monitored for major cities and towns having
population above 1 Lakh and all other towns covered under APDRP.
c) Customer Satisfaction
The improvement in customer satisfaction by adopting Information Technology for billing and collection
and consumer services including establishment of consumer care centers.
5.5 Support under APDRP
5.5.1 Investment component: The support under the investment component should continue as many Utilities
could not take full advantage of the same so far. Most of the Utilities have so far used APDRP fund
mainly for infrastructure build up, R&M of old assets, bifurcation of long feeders etc. and that also in
only in part of their working areas. The priority should be given for covering all the district headquarters
first and then the Utilities should move from bigger towns to smaller towns based on quantum of
energy handled and AT&C losses. Utilities should prepare a roadmap and their priority list in advance
and the work should be planned and implemented by adopting best practices.
38
5.5.2 Incentive Component: The Task Force recommends that the incentive component may be continued,
till a Utility start earning profit, with certain modifications as suggested herein. The base year for
calculation of the incentive may be kept as 2000-01. Each Discom of a state may be considered
independently for calculation for the incentive. This will motivate the individual companies to excel and
avoid one company being penalized for non-performing another company in the state.
5.5.3 The Task Force was of the view that the present methodology of calculation was quite complex. It
recommends that the same should be simplified. Considering the views of the Utilities that they should
not be penalized for the tariff compensation paid by the State Government to provide relief to certain
category of consumers, the Task Force recommends that the tariff compensation may be considered
as revenue income.
5.5.4 Another method of incentivizing the Utilities for achieving year wise agreed performance parameters
such as AT&C losses or reduction in gap between ARR and ACS may also be considered.
5.5.5 It may be made compulsory for the states to utilize the APDRP incentive for improvement in the power
sector only. To ensure this, the incentive fund may also be released directly to the Utilities except in
the case of private Utilities where the State Government should also utilize the same in the power
sector.
5.6 Funding under APDRP
5.6.1 50% Grant for General Category States
In the beginning of the programme, the funding was in form of 25% grant and 25% loan. However, on
the recommendation of the 12
th
Finance Commission, loan component was discontinued from April
2005. This has made the programme less attractive especially for the general category states. The
Utilities were of the view that the present funding was not very attractive for the Utilities to reform and
that the Government should put conditions on the Utilities in proportion to the fund extended to them.
The Ministry and Utilities were of the view that schemes targeting improvement in consumer services
now proposed to be undertaken will have higher pay back period and therefore, grant needs to be
increased.
5.6.2 Keeping in view that the APDRP assistance was only for towns and that the loss reduction targets
were Utility wise and to achieve the targets will require additional huge investment by the Utilities, Task
Force recommends for providing 50% cost of the schemes as grant (90% for special category states).
Increase in grant to the general category states will also reduce the huge gap in grant provided to
these states and special category states. Balance 50% (10% in case of special category) should be
arranged by the states as counterpart funds from the financial institutions or from their own resources.
5.6.3 Non Lapsable Fund
The Committee felt that though the Government had committed Rs. 40,000 Crore budget outlay for
the programme, the requirement however could not be met due to reduced allocation during 2005-
2006 and the same was expected during the current year also. This has created an uncertainty among
the Utilities about the availability of funds under the programme. In order to keep the focus of the
states and Utilities towards reforms and the improvement in the sector, Government should commit
sufficient non-lapsable fund for the programme. The Ministry may prepare an estimate of the fund
requirement under the programme and accordingly the APDRP budget should be prepared.
39
5.6.4 Central Scheme
The delay in transfer of fund from the states to the implementing agencies had been one of the major
reasons for delay in completion of the sanctioned schemes. There have been instances that the state
does not transfer the fund for more than a year and the Utility was not able to even award the schemes.
To avoid this problem, task force recommends that the fund for APDRP may be provided separately in
a manner so that it can be released by the Government directly to the Utilities/implementing agencies.
The Task Force recommends that the funding under the programme may be made under Central
Scheme and not as Additional Central Assistance.
5.7 Implementation and Monitoring of the Programme:
5.7.1 Activities eligible for assistance under APDRP
Keeping in view the objective of reduction in AT&C loss, improvement in reliability of supply and
improvement in consumer services, the focus of the new APDRP schemes should be on the following
activities:
i. IT based energy accounting & auditing with consumer indexing, including GIS;
ii. Spot billing, Computerised billing & revenue collection;
iii. Consumer Care Centers with adequate facilities;
iv. Schemes for reducing theft & pilferage;
v. Schemes for reducing technical losses;
vi. Works for better operation and monitoring of the network such as SCADA.
5.7.2 Augmentation of Distribution Network
The Task Force was of the view that support for infrastructure build up (construction of new substation
and lines) will also be essential for some more time. However, it should not be allowed for the areas
already covered under the programme except for works falling under above mentioned categories.
For the new areas, it may be made essential to include above activities and implementation of these
activities should be done on priority.
5.7.3 Provision of 5% of the outlay for Capacity Building etc.
The Utilities emphasized for provision of fund towards up gradation of skills of their employees and
hiring of consultants for planning, training, project preparation, project management, quality assurance,
project evaluation etc. Ministry of Power also emphasized for the continuance of Advisor cum Consultants
for vetting of DPRs submitted by the Utilities, assisting the Utilities in preparation of standard tender
documents, IT roadmap, monitoring of the implementation of the schemes and progress on performance
parameters etc. Task Force recommends that a provision of 5% of the annual budget may be kept for
such works in the programme. The Task Force was of the view that AcCs should not only advice the
Utilities but should also facilitate Utilities in adoption of the guidelines and specifications.
5.7.4 Preparation of DPRs
The Task Force felt that the Utilities should prepare bankable and implemental DPRs after proper
study with reliable base line and data. The objectives, procedures and expected benefits in form of
40
performance parameters vis--vis base line data should be clearly identified. The Utility should also
specify time schedule for each activity of the scheme. The tender documents should be standardized
and include price variation clauses and standard quality plan for quick and smooth implementation of
the projects.
5.7.5 Implementation of Projects
The Task Force recommends that the implementation of the schemes should be done on turnkey
basis only. Utilities, which intend to adopt non-turnkey execution of the APDRP projects, should take
prior approval of the Ministry. The Utilities may also devise packaging system in consultation with the
Ministry/AcCs to keep each of the packages in manageable size keeping in view the handling capacity
of the Utility and also with a view of getting good response from the contractors.
5.7.6 Standardization of Specifications
The Task Force recommends that AcCs may prepare technical specifications for all the equipments
including IT related works, based on the best practices in the country for ensuring the quality of work
under the programme. These specifications should be standardized in such a manner that sufficient
competition was available at the time of tendering. These specifications may be made binding on the
Utilities. The Utilities should not be allowed to change these specifications, except in case a Utility
wants to make the conditions more stringent. In case a Utility wants to deviate from these specifications,
it should take specific approval from the AcCs and Ministry.
5.7.7 Flexibility in Scope of DPRs
Regarding flexibility in the DPRs, in respect of variations in the quantity and cost of the components of
the schemes, the Task force recommends that a variation of plus or minus 10% to 15% may be
allowed in quantity or value of items within overall sanctioned cost of the scheme. However, no new
items should be allowed to be included after the sanction of the scheme. For implementing new items,
a separate scheme could be submitted for sanction. In respect of price increase of the sanctioned
scheme, the Task Force felt that Utilities were now in a better position to prepare realistic cost estimates
and recommends that the Utilities may bear the expenditure over and above the sanctioned cost.
5.7.8 Monitoring
The Utilities should monitor the implementation of the schemes closely to complete the work in time to
get maximum benefits out of the scheme. An effective MIS should be developed by them and utilized
for proper analysis and for taking corrective measures.
***
41
No. 14/01/2006-APDRP
Government of India
Ministry of Power
:::::::::::
Shram Shakti Bhavan, Rafi Marg,
New Delhi March 23, 2006
OFFICE MEMORANDUM
Subject: Constitution of a Task Force for restructuring of Accelerated Power Development
and Reforms Programme (APDRP)
:::::::::::
Based on the recommendations of Deepak Parekh committee set up in March 2002, the Accelerated
Power Development and Reforms Programme (APDRP) was restructured during the 10
th
Plan in 2002-03
with the objective to reduce Aggregate Technical and Commercial (AT&C) losses; to bring about commercial
viability; to reduce outages and interruptions; and to increase consumer satisfaction. Under APDRP, along
with the allocation of funds under the Investment Component, Reform- Linked Incentive Component was
also added for incentivising States for cash loss reduction. Since the inception of APDRP, 583 projects
costing Rs.19182.33 crore have been sanctioned and an amount of Rs.5934.34 crore released under the
investment component of APDRP, besides Rs. 3700.27 crores under loan component provided by financial
institutions. An amount of Rs.1516.64 crore has also been released under the Incentive Component. 28
projects have already been completed and in 200 projects more than 50% work has been completed.
Remaining projects are in various stages of implementation and balance funds are required to be released
as per norms at appropriate time, stretching even beyond 10
th
plan. In addition, if the utilities show improvement
in cash loss reduction in the final year of 10
th
plan, provision for release of incentive in the 11 th plan may
also be required. Thus, there will be commitments under APDRP during the 11
th
plan for the action initiated
in the 10
th
plan.
2. In order to assess the effectiveness of implementing APDRP, independent evaluators were engaged
for evaluation of the projects where more than 50% of the work had been completed. 66 projects were
thus evaluated and the evaluators have made certain suggestions for improvement in the programme.
3. With a view to examine the issues related APDRP including the achievements, the short comings,
problems of implementations and to make suggestions for improvement, it has been decided to
constitute a Task Force comprising:-
(i) Shri P. Abraham, Chairman, Maharashtra State Power Generation Co. Ltd Chairman
(ii) Dr. Uddesh Kohli, Ex-CMD, Power Finance Corporation
Annex ur e-I
42
(iii) Shri V.S. Ailawadi, Ex- Chairman, Haryana Electricity Regulatory Commission
(iv) Smt Vijaylakshmi J oshi, CMD, Gujarat Urja Vikas Nigam Ltd
(v) Shri Y.S. Ratra, Chairman, Punjab SEB
(vi) Shri M.K. Dey, Chairman, West Bengal SEB
(vii) Shri S.C. Das, Chairman, Assam SEB
(viii) Shri Ashok Khurana, Chairman, Uttar Pradesh PCL
(ix) Shri J ayant Kawale, MD, MSEB Holding Company Ltd
(x) A representative of Planning Commission
(xi) Shri M. Sahoo, J oint Secretary & FA, Ministry of Power
(xii) Shri V.S. Senthil, J oint Secretary (PF-I), Deptt of Expenditure, Ministry of Finance
(xiii) Shri Arvind J adhav, J oint Secretary (Dist), Ministry of Power - Member Convenor
4. The terms of reference of the Task Force shall be as follows:
(i) To assess the current efforts under APDRP;
(ii) Analyze the current reforms initiatives that are being pursued by the states with reference to the
objectives of APDRP;
(iii) To assess the need for modifications in the light of independent evaluations and other feed
back;
(iv) Suggest measures to achieve the objectives of APDRP.
5. Power Finance Corporation (PFC) will provide necessary secretarial assistance to the Committee and
meet the expenses of the Committee.
6. The Task Force may submit its report within three months of the constitution.
(S.K. Gupta)
Section Officer (APDRP)
TEL:23715507 , Ext. 292
To
All members of the Task Force
Copy to: Chairman & Managing Director, Power Finance Corporation
43
Status of APDRP Investment Component
(As on 31.05.2006)
(Rs. in Crore)
Sl State Project APDRP Rel eases Utilisation C/Part C/Part
Outlay Cost Total % Fund Fund
sancti oned drawn
Non-Special Category State
1 A.P. 1458.49 648.00 566.76 967.52 66.34 744.78 456.57
2 Bihar 854.05 370.10 313.18 309.72 36.26 377.75 150.18
3 Chattisgarh 407.70 181.53 159.21 133.28 32.69 65.99 65.99
4 Delhi 922.61 283.41 105.51 863.23 93.56 767.72 767.72
5 Goa 294.01 130.20 113.40 129.09 43.91 62.70 44.87
6 Gujarat 1083.22 470.94 400.26 824.94 76.16 480.54 372.44
7 Haryana 431.95 192.48 168.99 210.79 48.80 225.34 104.71
8 J harkhand 423.65 182.85 153.87 167.34 39.50 222.42 65.54
9 Karnataka 1186.31 514.30 447.97 798.69 67.33 668.97 567.50
10Kerala 863.63 331.18 230.55 313.17 36.26 175.18 142.55
11 M.P. 663.20 230.74 129.87 215.72 32.53 339.54 127.37
12Maharashtra 2231.58 692.01 349.01 943.53 42.28 713.64 376.62
13Orissa 592.22 185.07 74.02 59.47 10.04 296.11 35.52
14Punjab 715.57 268.26 178.74 302.65 42.29 353.19 197.20
15Rajasthan 1193.25 491.23 385.83 712.60 59.72 417.92 219.49
16Tamil Nadu 948.12 457.94 441.82 724.14 76.38 484.09 392.77
17U. P. 1091.30 340.09 174.01 521.68 47.80 463.17 326.70
18W. Bengal 442.20 130.64 92.92 226.09 51.13 210.29 75.24
Total 15803.06 6100.95 4485.92 8423.65 53.30 7069.34 4488.98
Special Category State
19Arunachal Pr. 82.69 78.09 36.68 16.75 20.26
20Assam 650.73 601.54 278.51 237.91 36.56
21H.P. 322.77 306.89 242.33 214.71 66.52
22J & K 1100.13 1021.61 408.50 322.18 29.29
23Manipur 141.62 127.73 2.67 2.67 1.89
24Meghalaya 227.44 210.53 58.38 48.07 21.14
25Mizoram 108.74 100.76 78.01 28.96 26.63
26Nagaland 122.27 114.33 68.58 42.84 35.04
27Sikkim 164.19 163.24 154.73 134.83 82.12
28Tripura 146.74 135.83 37.64 31.29 21.32
29Uttaranchal 310.08 303.15 279.76 226.62 73.08
Total 3377.40 3163.70 1645.78 1306.83 38.69
GRAND TOTAL 19180.46 9264.65 6131.70 9730.48 50.73 7069.34 4488.98
(Source: Min. of Power)
Annex ur e-I I
44
Annex ur e-I I I
Status of Incentive Claims
(As on 31.05.2006)
(Figures in Rs. Crore)
SL. STATE CLAIM CLAIM CASH LOSS ELIGIBLITY INCENTIVE BALANCE
YEAR AMOUNT REDUCTION RELEASED
1 Andhra Pr. 02-03 481.82 530.22 265.11 265.11 NIL
03-04 147.23 NIL NA
04-05 174.63 Under Scrutiny by CARE
2 Bihar 01-02 422.12 Claim based on Provisional Accounts
3 Assam 01-02 12.06 NIL NA
02-03 118.62 NIL NA
4 Gujarat 01-02 235.16 472.76 236.38 236.38 NIL
02-03 149.31 296.16 148.06 148.06 NIL
03-04 14.11 NIL NA
04-05 458.59 Claim based on Provisional Accounts
5 Goa 01-02 280.00 NIL NA
02-03 64.02 NIL NA
6 Haryana 01-02 105.49 210.98 105.49 105.49 NIL
7 Himachal Pr. 02-03 109.40 NIL NA
03-04 258.45 NIL NA
8 Karnataka 02-03 256.81 NIL NA
03-04 362.51 NIL NA
9 Kerala 01-02 165.00 NIL NA
02-03 159.41 129.86 64.94 64.94 NIL
03-04 461.82 NIL NA
04-05 477.74 160.32 80.16 Under Process
10 Madhya Pr. 01-02 724.14 77.44 38.72 NIL NIL
02-03 330.72 612.86 306.43 Under Process
11 Maharashtra 01-02 137.89 275.78 137.89 137.89
12 Punjab 01-02 240.74 NIL
02-03 639.10 NIL NA
03-04 243.10 503.88 251.94 65.28 188.66
13 Rajasthan 01-02 137.71 275.42 137.71 137.71 NIL
14 Tamilnadu 01-02 265.23 NIL
02-03 440.75 NIL
15 Tripura 03-04 33.80 67.60 33.80 Under Process
16 Uttar Pr. 02-03 281.06 NIL NA
17 Uttaranchal 02-03 6.21 NIL NA
18 West Bengal 01-02 406.76 NIL
02-03 911.03 146.00 73.00 73.00
03-04 953.39 605.52 302.76 302.76
04-05 103.38 11.75 5.88 Under Process
19 Meghalaya 03-04 26.38 NIL NA
TOTAL 10795.69 4376.55 2188.27 1536.62
(Source: Min. of Power)
45
Annex ur e-I V
SAMPLE
MEMORANDUM OF AGREEMENT UNDER APDRP
(Signed between Utilities and Ministry of Power)
(This Memorandum of Agreement is to be executed on Non-J udicial
Stamp Paper of Rs. 50/- if executed at Delhi)
MEMORANDUM OF AGREEMENT
BETWEEN
PRESIDENT OF INDIA THROUGH
SECRETARY, MINISTRY OF POWER
GOVT. OF INDIA
State Electricity Board
DATED...................2002
MEMORANDUM OF AGREEMENT
Made this.................................................. day of...................................... 2002 between the President of
India through Secretary MINISTRY OF POWER, Govt, of India (hereinafter referred to as CENTRAL
GOVERNMENT) of the one part and ..................... State Electricity Board constituted under the Electricity
(Supply) Act, 1948 having its Head/Registered Office at ................................................ (hereinafter referred
to the Beneficiary which expression shall unless repugnant to the context or meaning thereof includes its
successors and assigns) of the other part.
WHEREAS the Beneficiary has undertaken execution of .........................................................................
........................................................................................................(hereinafter referred to as the Project).
AND WHEREAS the Beneficiary vide its letter No.................... dated.................... Submitted a proposal to
the Central Govt. for sanction of a Project for Rs............................................................ (Rupees
.................................................................................................... only) under APDP to be utilized for setting/
establishing the said Project.
AND WHEREAS the Central Govt. has sanctioned the Project of Rs...................... (Rupees
.......................................................................................................only) under APDP to the Beneficiary for
the purpose of the execution of the aid Project on the terms and conditions contained in the Ministry of
Power letter No. 12/4/99-Dir (Th) dated 22
nd
February, 2001 to the Beneficiary thereby conveying sanction
of the Project and on the terms and conditions set out in the said letter and also hereunder written.
AND WHEREAS the Beneficiary has by its Resolution passed at a meeting of its Board on the..................
day of 2002 has been fully authorized to implement the said Project on the said terms and conditions to
the satisfaction of the Central Govt.
46
NOW IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO as follows:-
1. The MOU signed between Government of India through Secretary (Power) and State Government
shall be implemented by State Electricity Board in letter and spirit.
2. The Central Govt. will release funds under APDRP in the combination of grant and loan to the
implementing Beneficiary the sum of Rs........................................................................................................
(Rupees ...................................................................... only) on the terms and conditions set out in the
Ministry of Power, Govt. of India said letter dated. 2002 and on the terms and conditions herein set
out. The said sanctioned letter shall form integral part of this Agreement (as Annexure-I) and all the
terms and conditions set out in the said letter will be mutatis mutandis binding on the Beneficiary and
the Beneficiary do hereby undertake to fully comply with the terms and conditions of these presents.
3. The Central Government shall provide 25% of the Project cost as Grant in Aid. Further Central
Government shall also provide 25% of the Project cost as Loan to be repaid by the Beneficiary to the
Central Government as per terms and conditions of Loan Agreement to be separately executed between
the parties to these presents.
4. The Beneficiary shall ensure that the fifty percent balance funds required for the Project will be properly
tied up within two months of the sanction letter and that this agreement will be appended to the Loan
Agreement with the concerned Financial Institution. In case, the Beneficiary wishes to use its internal
resources, the Beneficiary has to remit the amount to a separate account in the first instances as
indicated in the para 5 herein.
5. The procedure for fund release to the Beneficiary will be as below:-
(a) 25% of the APDRP amount up front on approval of Project under APDRP and on issue of
sanction letter by the Financial Institutions.
(b) Release of matching fund by Financial Institutions (FIs)
(c) After spending 25% of the project cost (i.e. 25% APDRP +25% of loan component from FIs),
50% of the APDRP amount would be released.
(d) Progressive release, the balance 50% of the APDRP amount by FIs.
(e) After spending 75% of the Project Cost (i.e. 75% APDRP +25% of loan component from FIs)
balance 25% of the APDRP amount would be released.
(f) Progressive release of the balance 25% of the APDRP amount by FIs.
6. An incentive would be provided by MOP to SEB for actual cash loss reduction by way of matching
grants in the following manner: -
a) SEB has to submit its provisional annual account for the period ending 31
st
March of the previous
financial year for evaluation by MoP for arriving at actual improvement/ reduction in the Gross
Operating Surplus/ Deficit over the audited figures of the immediately preceding financial year.
b) The actual improvement in the surplus or deficit as the case may be would be determined after
excluding revenues attributable to tariff increase to subsidizing categories of consumers, additional
generation purchase and sales of units and increase in input costs of generation..
c) 25% of provisional incentive thus arrived at would be given as advance grant for the year
d) The SEB would be entitled for balance 75% grant only after they submit audited accounts of the
previous year before the end of the financial year.
47
7. DISTRIBUTION REFORM & PERFORMANCE CONDITIONS
It is specifically agreed between the Ministry of Power, Government of India, and the Beneficiary
(SEB) that the Beneficiary shall fully undertake to comply with the following mandatory Distribution
Reform oriented conditions in order to avail the APDRP Fund from the Central Government.
7.1 AT SEB / DISCOM LEVEL (Applicable for all circles)
ADMINISTRATIVE
a. A State level Distribution Reforms Committee shall be constituted by the Beneficiary within one month
of signing of this MOA. The Committee shall comprise of the State Government representative, Head
of the SEB, a representative from NTPC or POWERGRID and a representative from CEA or MOP.
The committee shall meet once in two months and review:
i. Progress of APDRP project implementation
ii. Compliance to MOU conditions
iii. Compliance to MOA conditions
iv. Performance against APDRP targets & Benchmarks
b. The Superintending Engineer/Circle In-charge of the circle shall be the Nodal officer for the Circle and
he will be designated as Chief Executive Officer of the Circle, within a week of signing of this MOA.
COMMERCIAL
c. The Beneficiary shall fix allocation of power to a circle at point of import in the circle. Mechanism for
regulating over drawls and/or under drawls shall also be put in place.
d. The circle CEO shall be authorized to sell the surplus power resulting as a consequence of techno-
commercial intervention, after meeting the requirements of the consumers, within circle; to the other
circle CEOs or to any bulk consumer outside circle.
e. Suitable policy provisions shall be formulated by the Beneficiary within two years of signing of this
MOA for handing over parts of distribution system on management contract or on lease to local bodies,
franchises, consumer cooperatives, local institutions / Users Associations, on management contract
or lease etc. at corporate level to promote bulk consumers.
f. There shall be mandatory energy audit & commercial accounting for each 11 kV feeder on actual
meter reading basis. Reports of the internal audit shall be maintained as described below:
i) From point of import up to 11 kV outgoing feeder - substation wise accounting of input & output
on monthly basis with immediate effect.
ii) Individual feeder wise accounting & audit to cover all consumers on the feeder once in two
months commencing within 3 months of date of installation of feeder meters. For past period six
monthly accounts to be furnished.
g. The process of setting the Computerized billing centers shall be started in each circle within one year
of the effectiveness of this Agreement
TECHNICAL
h. For APDRP and non-APDRP works to be taken up, the Beneficiary may adopt turnkey packaging
concept or shall evolve a rate contract system for equipments of repetitive nature, adopting the standard
specifications, so that the circle CEOs are able to operate the rate contract for procurement of above
48
equipments to meet the respective project implementation schedules. The standard specifications for
turn key contracts with reliability & quality norms and performance guarantee provisions as well as list
of accredited contractors shall be in place within two months of signing of this MOA. The project
execution mechanism shall be finalized by Beneficiary and informed within one month of signing of
this agreement.
i. Beneficiary shall formulate a suitable policy to enable circle CEO & to outsource activities like consumer
indexing, meter reading, Billing, Bill delivery and periodic maintenance of DTs, substation equipment,
lines etc. The policy shall be declared for implementation within three months of signing of this MOA.
j. The Beneficiary agrees to systematically improve its financial viability by bench marking their
performance and periodically monitoring the same. The existing benchmarks shall be documented
along with the expected level to be achieved and the time frame for achieving the same. The bench
marks would be established at least on the items given in Annexure-II based on last audited and
adopted report for SEB targets set and the yearly progress expected is to be mutually agreed as per
Annexure II.
k. Feeder metering from point of input up to 11 kV feeder level shall be completed and made operational
within three months of the signing of this MOA
l. It shall be mandatory to install tamper proof, static / high precision, energy meters for all customers
within seven months of the signing of this MOA. Except for agriculture consumers which shall be
completed within two years. For industrial and commercial consumers, the meters shall be with digital
interface and installation completed within three months of the signing of this MOA.. For all consumers
in urban and semi urban areas the metering shall be completed within three months of the signing of
this MOA.
m. Henceforth no new connections shall be released without meters. A monthly report on category wise
connections in the State indicating the new connections released during the month and progress of
installation of meters on existing connections and current status of metering shall be maintained.
n. Installation of Capacitors by all consumers of 5 HP and above shall be made mandatory and penal
actions shall be taken for non-compliance except for agriculture consumers, which shall be completed
within two years. SEB to formulate suitable Policy guidelines within three months of signing of this
MOA and enforce the same within six months from signing of this MOA. A monthly report of capacitor
installation and average power factor as observed at the point of input to each of the circles shall be
maintained.
o. Consumer indexing shall be done linking a consumer at least up to the Distribution Transformer to
which he is connected. The distribution transformer could in turn be linked to the 11 kV feeders upwards.
A bi-monthly report on progress of indexing, Sub Division wise, shall be maintained. The task of linking
consumer index to the computerized billing database shall be completed within six months of the
signing of this MOA.
Applicable for APDRP circles
p. The CEOs of the circle shall be preferably retained in their respective positions irrespective of promotion
for a minimum period of three years. However due to unavoidable circumstances, if any change is
necessary, this may be done by following an agreed procedure without affecting the continuity and
timely implementation of the program and achievement of objectives
49
q. An MOU based on the circle performance and benchmark parameters as given in Annexure III shall
be executed between Beneficiary and the CEO of the circle within one month of signing of this MOA.
r. The CEO shall be allowed to open a separate account with a Bank within a month of signing this MOU
for depositing the increased revenue resulting as a consequence of investment made in the circle
under APDRP. This arrangement will help in demonstrating the commercial viability of the investment.
7.2 AT CIRCLE LEVEL (Applicable for APDRP circles)
In addition to the conditions stipulated at Para 7.1 (a to r) above the following shall also be applicable
for the APDRP circles:
ADMINISTRATIVE
a) The organization structure indicating names of officers for implementation of APDRP works of planning,
procurement and implementation shall be identified and intimated by CEO of the Circle, within one
month of signing of this MOA.
b) Within a month of signing of this MOA, a J E shall be designated as a Feeder manager for one or more
but not more than 3 (Three), 11 kV feeders.
c) The CEO shall enter into a similar MOU with the other sub-ordinate officers who in turn would enter
into MOUs with Feeder Managers within a month of signing of this MOA, setting out targets to be
achieved.
d) There shall be monthly monitoring & review of achievements on technical, commercial and benchmarks
by the CEO of the Circle along with the Advisor-cum-Consultants (AcCs). The records of the review
along with the reasons and action proposed for overcoming shortfall shall be maintained to MOP.
COMMERCIAL
e) The distribution circles shall be operated as profit center and as an independent administrative unit
with adequate delegation of technical, financial and commercial power for Operation, Maintenance,
Project Implementation and outsourcing as per policies drawn by the Beneficiary.
f) 11 kV feeder shall function as a separate business administrative unit under the feeder manager by
merging technical and commercial responsibilities .
g) Vigilance squads shall be strengthened for theft detection. The summary of achievements of these
squads shall be put to State level cell, on monthly basis.
TECHNICAL
h) Digital interface for automatic logging of data into a computer at the substations shall be provided
WITHIN 9 MONTHS.
i) Outages on feeders, causes for the same and corrective and preventive action taken shall also be
entered on the computer at the sub stations. Necessary installation for same shall be completed within
2 months of signing the MOA.
j) A monthly report of outages, energy flow, maximum MW and MVAR flow at feeder level as well as at
power transformer level shall be furnished.
k) A system of recording consumer complaints shall be developed and the corrective and preventive
action recorded. A monthly summary of such complaints shall be maintainedmaintainedmama.
50
8. The Beneficiary shall open a separate account in a Schedule Bank / Nationalized Bank, hereinafter
known as APDRP Fund for the purpose of implementing the Projects under APDRP. Funds form
APDRP, loans from Financial Institutions and / or from internal resource earmarked for this purpose
shall be credited to this APDRP Fund by the Beneficiary in the first instance.
9. The Beneficiary shall implement the said Project and shall also adhere to and comply with all such
amendments thereto as are approved by the Central Govt. from time to time.
10. The Beneficiary agrees and undertakes to complete the work in the manner and according to the time
schedule envisaged in terms and conditions of sanction loan.
11. The Beneficiary has represented to and assured the Central Govt. that the loan applied for and being
granted by the Central Govt. to the Beneficiary is within the borrowing powers of the Beneficiary in
accordance with the laws and bye-laws applicable to it and all formalities, required by the laws and
bye-laws and rules regulating the work and conduct of the Beneficiary in respect of such borrowing
have been fully complied with.
12. The Beneficiary shall furnish to the Central Govt. bi-monthly report of the workings and with regard to
the utilisation of the funds and the progress of the Project.
13. The Beneficiary shall make available for the inspection of the Central Govt. and/or its nominated
Agency all its books of account and other books and documents maintained by it and/or required to be
maintained by it under any law, bye-laws or rules of the Beneficiary and allow all facilities to the Central
Govt. or any persons authorised by it for the purpose of carrying out such inspection. The Central
Govt. shall have the right to inspect the Project and all the books of accounts, records and documents
relating thereto at any time after giving prior intimation to the Beneficiary for the purpose.
14. The Beneficiary agrees and undertakes to execute, sign, seal and deliver all documents, papers,
acknowledgements and other writings as may be required by the Central Govt. at any time during the
pendency of this Agreement, more fully and effectively securing the moneys due and payable or to
become due and payable by the Beneficiary to the Central Govt. in terms of these presents and the
Loan Agreement to be executed between the parties to these presents.
15. The Beneficiary shall not transfer or abandon the Project at any stage without written consent of the
Central Govt. In case at any stage or on a future date, the Project is proposed to be transferred to any
other organisation or to be abandoned, the entire outstanding (e.g. principal, interest, interest tax,
service charges, commitment charges, penal interest, interest on penal interest etc.) due from the
Beneficiary shall be paid to the Central Govt. before any such transfer is affected.
16 In the event of a default on the part of the Beneficiary or any breach of the terms and conditions of
these presents and the Loan Agreement to be executed between the parties to these presents, the
Beneficiary shall be liable to pay to the Central Govt. all costs, charges and expenses incurred/to be
incurred by the Central Govt. in connection with the negotiations and execution for the Agreement
including legal expenses incurred for realization/recovery of the outstanding dues.
17. The Central Govt. shall without prejudice to its other rights and remedies be entitled to recall the loan
at any time before the due date for repayment thereof, if the Beneficiary fails to fulfill its obligations
under this Agreement and/or in the event of its committing a breach of any of the terms thereof. The
decision on whether a breach of the terms, of this Agreement and Loan Agreement, has been committed
by the Beneficiary or not, shall be decided mutually.
51
18. Every notice, demand, request, consent, approval, waiver or agreement to be given or made hereunder
shall, save as otherwise herein specifically provided, be in writing and in the English Language and
shall be delivered by hand or sent by mail (Registered Post) or by telex or cable and shall be deemed
to haven been given and received, if delivered by hand, upon delivery, if sent by mail, the 3rd day
(excluding Saturday, Sunday and other closed days) following the date of mailing, and if sent by telex
or cable, the 2nd day (excluding Saturday, Sunday and other closed days) following the date of
transmission.
19. In the event of default by State Govt. of the conditions of MOU signed between Government of India
and the State Government or default by SEB of the MOA conditions, further release of funds under
APDRP shall be stopped.
20. The mailing address, telex number and cable address of the Beneficiary and Central Govt. for purposes
shall respectively be:
for the Beneficiary
_______________________________
_______________________________
_______________________________
for MINISTRY OF POWER
Shram Shakti Bhavan, Rafi Marg
New Delhi 110001
In case there is any change in the mailing address the same shall be notified by the authorized
signatory of these presents.
21. Effective date and validity
This Agreement shall come into force for all purpose and intents w.e.f. the date of execution of these
presents and shall remain valid for a period of ............ years.
22. Any amendment or modification of this Agreement shall be made in writing by the parties to these
presents or their authorized signatories on the terms & conditions mutually agreed between the parties.
23. Termination of this Agreement
This Agreement may be terminated at any time by any party after giving three months notice from
either side.
24. Settlement of disputes and Arbitration
It is agreed between the parties that any dispute or difference arising out of this Agreement or under
the Loan Agreement to be executed between the parties to this Agreement shall be in the first instance
settled by amicable settlement. In case the settlement could not reach in respect of any matter or
controversy arising out of this Agreement or under the Loan Agreement the same shall be resolved
through Arbitration of a Sole Arbitrator of the Secretary, Ministry of Power in accordance with the
provisions of Arbitration & Conciliation Act, 1996. The venue of the Arbitration shall be New Delhi. The
52
cost of Arbitration shall be shared equally between the parties. The Arbitrator shall give reasoned and
speaking award.
25. Governing Laws & J urisdiction
This Agreement shall be governed by Indian Laws and the Courts in Delhi/New Delhi alone shall have
jurisdiction to entertain any suit or matter arising out of this Agreement.
IN WITNESS whereof the parties hereto have executed these presents the day, month and year first
herein written.
SIGNED AND DELIVERED BY
(on behalf of MINISTRY OF POWER)
Signature ..............................................................
Name & Designation .....................................................................................................................................
Address ........................................................................................................................................................
.......................................................................................................................................................................
in the presence of .........................................................................................................................................
Signature ..............................................................
Name & Designation .....................................................................................................................................
Address ........................................................................................................................................................
.......................................................................................................................................................................
SIGNED AND DELIVERED BY
(on behalf of SEB/Beneficiary)
Signature ..............................................................
Name & Designation .....................................................................................................................................
Address ........................................................................................................................................................
.......................................................................................................................................................................
in the presence of .........................................................................................................................................
Signature ..............................................................
Name & Designation .....................................................................................................................................
Address ........................................................................................................................................................
.......................................................................................................................................................................
(Source: Min. of Power)
53
Proforma: Benchmarking of Performance Parameters at State Level
Sl. Parameters Current Target Anticipated achievement by
No. Level Level 2002-03 2003-04 2004-05
1 Input energy Vs metered energy sale
to consumers (energy billed on flat
rate/assessed basis is not to be
included) for the entire state
2 T&D losses in MU (flat rate sales and
unmetered sales is not to be included)
for entire state
3 Gap between ARR and ACS per unit
of energy (ARR-ACS). ARR: Ratio of
Gross Revenue Sales in crores of Rs
and Net Energy Input in MU for entire
state. ACS: Ratio of cost of supply
(including generation cost, purchase
and overhead cost) in crores of Rs.
And Net Energy input in MU for entire
state
4 Productivity- Ratio of Metered energy
sale to consumers and total
Manpower strength in a SEB/
DISCOM (executive plus supervisors
plus support staff)
5 Improvement in PLF, heat rate and
auxiliary power consumption
(Weighted Average for Generation
plants owned by SEB)
6 Outstanding dues to CPSUs and other
agencies (Outstanding dues are
cumulative Amount in Rupees crores
as on 31
st
Dec.01)
7 Declared financial losses (to be
provided in terms of Rs and also in
terms of percentage sales on financial
year basis)
(Source: Min. of Power)
54
Proforma: Benchmarking of Performance Parameters at Circle/Town Level
Sl. Parameters Current Target Anticipated achievement by
No. Level Level 2002-03 2003-04 2004-05
1 Input energy to circle Vs metered
energy sale to consumers (energy
billed on flat rate/assessed basis is
not to be included)
2 T&D losses in MU (flat rate sales
and unmetered sales is not to be
included)
3 Gap between ARR and ACS per unit
of energy (ARR-ACS). ARR: Ratio
of Gross Revenue Sales in crores of
Rs and Net Energy Input in MU for
entire state. ACS: Ratio of cost of
supply (including generation cost,
purchase and overhead cost) in
crores of Rs. And Net Energy input
in MU for entire circle
4 Productivity- Ratio of Metered
energy sale to consumers and total
Manpower strength in a SEB/
DISCOM (executive plus
supervisors plus support staff)
5 Billing cycle time (Period)
6 Feeder outages (Numbers)
7 Failure rate of DTs (Percentage)
8 Consumer complaints (Numbers)
9 Complaint disposal time (Period)
10 HT/LT Ratio
11 Average Load factor on Distribution
Transformers
12 Average Power Factor
(Source: Min. of Power)
55
Annex ur e-V
Status of Power Sector Reforms
Region Sl State Restructuring SERC
NR 1 Delhi Yes Yes
2 Haryana Yes Yes
3 Rajasthan Yes Yes
4 Uttar Pr. Yes Yes
5 Uttaranchal Yes Yes
6 Himachal Pr. Extn. Till Dec 06 Yes
7 Punjab Extn. Till Dec 06 Yes
8 J &K * Yes
WR 9 Gujarat Yes Yes
10 Madhya Pr. Yes Yes
11 Maharashtra Yes Yes
12 Chattisgarh Extn. Till Dec 06 Yes
13 Goa * Yes
SR 14 Andhra Pr. Yes Yes
15 Karnataka Yes Yes
16 Kerala Extn. Till Dec 06 Yes
17 Tamilnadu Extn. Till Dec 06 Yes
ER 18 Orissa Yes Yes
19 Bihar Extn. Till Sep 06 Yes
20 J harkhand Extn. Till Oct 06 Yes
21 West Bengal Extn. Till Sep 06 Yes
22 Assam Yes Yes
NER 23 Meghalaya Extn. Till Dec 06 Yes
24 Ar. Pradesh *
25 Mizoram * Notified
26 Manipur * Notified
27 Nagaland *
28 Tripura Yes
29 Sikkim * Yes
Total 13 25
* States are having State Power Deptt. (Source: Min. of Power)
56
Annex ur e-VI
State Wise Commercial Loss (w/o subsidy) of Power Utilities
(Rs. Crore)
Sl. Region/State 2001-02 2002-03 2003-04 2004-05
Eastern
1 Bihar (896) (966) (987) (1,122)
2 J harkhand (255) (462) (730) (1,183)
3 Orissa (261) (944) 193 03
4 Sikkim (10) (30) 42 56
5 West Bengal (1,706) (914) (296) (275)
North-Eastern
6 Arunachal Pradesh (93) (84) (126) (87)
7 Assam (696) (776) (656) (1,081)
8 Manipur (129) (128) (128) (127)
9 Meghalaya (34) (52) 64 (9)
10 Mizoram (30) (44) (62) (48)
11 Nagaland (52) (61) (167) (96)
12 Tripura (102) (93) (7) (27)
Northern
13 Delhi (1,092) (803) (1,781) (812)
14 Himachal Pr. (107) (52) (46) (37)
15 Haryana (948) (803) (785) (1,449)
16 J &K (703) (1,089) (989) (1,080)
17 Punjab (1,868) (1,386) (663) (1,520)
18 Rajasthan (1,324) (1,739) (1,777) (2,037)
19 Uttar Pradesh (2,518) (2,374) (2,116) (3,624)
20 Uttaranchal (26) 23 (40) (179)
Southern
21 Andhra Pradesh (2,948) (1,232) (1,579) (1,194)
22 Karnataka (1,870) (1,599) (1,315) (1,107)
23 Kerala (1,254) (935) (916) (239)
24 Pondicherry (43) 33 38 52
25 Tamilnadu (5,174) (2,100) (1,360) (2,030)
Western
26 Chattisgarh 204 643 561 370
27 Goa (7) 131 153 146
28 Gujarat (3,146) (2,267) (3,031) (2,125)
29 M.P. (1,703) (835) (667) (764)
30 Maharashtra (540) (255) (549) (804)
Grand Total (29,331) (21,193) (19,722) (22,129)
(Source : PFC)
57
Annex ur e-VI I
11kV Feeder Metering Status
Sl . STATE 2001-02 2005-06
Numbers Metered %age Numbers Metered %age
(Lakh) (Lakh) (Lakh) (Lakh)
1 Andhra Pradesh 4907 4907 100 9239 8674 94
2 Arunachal Pradesh 168 33 20 201 1 0
3 Assam 777 777 100 709 709 100
4 Bihar 1517 600 40 1125 465 41
5 Chattisgarh 767 100 13 1574 1511 96
6 Delhi 1400 1400 100 1850 1850 100
7 Goa 170 170 100 179 179 100
8a Gujarat (GEB) 5939 5939 100 5307 5307 100
8b Gujarat (Torrent/AEC) 752 266 35
8c Gujarat (Torrent/SEC) 303 303 100
9 Haryana 2557 2557 100 3888 3888 100
10 Himachal Pradesh 375 350 93 762 727 95
11 J ammu & Kashmir 1214 1214 100 1558 1480 95
12 J harkhand 461 396 86
13 Karnataka 3518 3518 100 4570 4570 100
14 Kerala 1047 1047 100 1334 1334 100
15 Madhya Pradesh 5498 2943 54 5660 5660 100
16a Maharashtra (BEST) 594 0 0
16b Maharashtra (MSEB) 7558 7558 100 6148 6148 100
16c Maharashtra (REL) 600 300 50
17 Manipur 193 40 21 193 40 21
18 Meghalaya 314 96 31 175 175 100
19 Mizoram 106 98 92 129 93 72
20 Nagaland 93 32 34 164 140 85
21 Orissa 1858 500 27 1792 1699 95
22 Punjab 4563 4360 96 5928 5928 100
23 Rajasthan 7321 3321 45 8411 8411 100
24 Sikkim 124 124 100 113 113 100
25 Tamilnadu 3684 3684 100 3777 3777 100
26 Tripura 118 118 100 197 197 100
27 Uttar Pradesh 8124 8124 100 8507 8507 100
28 Uttaranchal 348 330 95 1008 1008 100
29 West Bengal 2800 615 22 2347 2347 100
30 Chandigarh 174 174 100
31 Daman &Diu 51 51 100
32 Pondicherry 89 89 100
Total 67058 54555 81 79869 76517 96
(Source: Min. of Power)
58
Annex ur e-VI I I
Consumer Metering Status
Sl . STATE 2001-02 2005-06
Numbers Metered %age Numbers Metered %age
(Lakh) (Lakh) (Lakh) (Lakh)
1 Andhra Pradesh 113.20 90.50 80 157.46 150.47 96
2 Arunachal Pradesh 1.30 0.70 54 1.13 0.52 46
3 Assam 9.50 6.50 68 12.74 12.09 95
4 Bihar 23.76 17.16 72 12.50 6.23 50
5 Chattisgarh 18.70 11.20 60 22.91 15.81 69
6 Delhi 27.10 26.26 97 26.65 26.65 100
7 Goa 4.00 3.80 95 3.96 3.86 97
8a Gujarat (GEB) 69.21 63.55 92 74.77 69.57 93
8b Gujarat (Torrent/AEC) 12.64 12.64 100
8c Gujarat (Torrent/SEC) 5.20 5.20 100
9 Haryana 35.11 32.65 93 39.17 36.12 92
10 Himachal Pradesh 16.50 15.10 92 16.97 16.97 100
11 J ammu & Kashmir 10.00 4.00 40 10.00 4.00 40
12 J harkhand 6.53 4.90 75
13 Karnataka 85.00 48.40 57 128.89 105.68 82
14 Kerala 62.50 58.00 93 77.99 77.99 100
15 Madhya Pradesh 63.29 35.46 56 64.92 46.50 72
16a Maharashtra (BEST) 667.00 666.00 100
16b Maharashtra (MSEB) 129.00 109.00 84 135.32 118.12 87
16c Maharashtra (REL) 24.95 24.95 100
17 Manipur 1.70 1.40 82 1.70 1.40 82
18 Meghalaya 1.40 0.90 64 1.68 0.84 50
19 Mizoram 1.04 0.48 46 1.28 1.27 99
20 Nagaland 1.50 1.10 73 1.88 1.14 61
21 Orissa 14.50 11.50 79 21.49 17.45 81
22 Punjab 52.71 44.68 85 58.94 50.39 85
23 Rajasthan 53.05 43.25 82 58.45 54.78 94
24 Sikkim 0.70 0.30 43 0.65 0.60 92
25 Tamilnadu 147.68 117.42 80 170.33 148.13 87
26 Tripura 1.80 1.20 67 2.28 1.84 81
27 Uttar Pradesh 78.10 46.03 59 88.06 80.38 91
28 Uttaranchal 8.54 7.09 83 9.87 7.73 78
29 West Bengal 38.00 32.00 84 47.27 45.89 97
30 Chandigarh 1.81 1.54 85 1.97 1.97 100
31 Daman &Diu 0.52 0.52 100
32 Pondicherry 2.19 2.11 96
Total 1070.70 831.17 78 1970.26 1820.70 92
(Source: Min. of Power)
59
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xii
MU Million Units
MVVNL Madhyanchal Vidyut Vitran Nigam Ltd.,
NDPL New Delhi Power Ltd.,
NER North Eastern Region
NESCO North Electricity Supply Company of Orissa
NPC National Productivity Council
O&M Operation & Maintenance
PaVVNL Paschimanchal Vidyut Vitran Nigam Ltd,.
PFC Power Finance Corporation
PLF Plant Load Factor
PMI Power Management Institute
PoVVN Poorvanchal Vidyut Vitran Nigam Ltd.,
R&M Renovation & Modernisation
REC Rural Electrification Corporation
REL Reliance Energy Limited
RGGVY Rajiv Gandhi Gramin Vidyutikaran Yojana
SCADA Supervisory Control and Data Acquisition
SEB State Electricity Board
SEC Surat Electricity Company
SERC State Electricity Regulatory Commission
SESCO South Electricity Supply Company of Orissa
SPV Special Purpose Vehicle
STU State Transmission Utility
T&D Transmission & Distribution
TERI The Energy Resource Institute
TN Tamil Nadu
U.P Uttar Pradesh
UHBVNL Uttar Haryana Bijli Vitran Nigam Ltd.,
UPPCL Uttar Pradesh Power Corpn. Ltd.,
WESCO West Electricity Supply Company of Orissa