Unconventional look at losses in India’s distribution sector: Discom survival depends on state ownership


If meters are the “cash register” for a Discom, clearly this new cash register is not working very well. Indian Discoms incur heavy losses every year, are bankrupt and survive only because they are state owned.

Why, when they have installed modern metering technology, are they severely out of pocket?

There are many reasons for this, but a big one is metering and how the Discoms use it. A cursory examination of the specifications for meters being procured will tell the story. Every meter that is bought has an optical communications port. Most orders require the meter vendor to supply a certain number of hand held terminals for meter reading. Yet nationally 99% of all meter readings are taken by eyeball, pencil and paper. The benefits from accurate billing, a faster revenue cycle and reduced theft remain unrealised. Having bought modern technology, Discoms somehow fail to use it.

Not only that, an analysis of the specifications put out to tender will reveal that more and more features are being asked for but none are being used. Why this paradoxical behaviour?

As a work culture, Discoms are typically top driven organisations. Their bureaucratic culture forces even small decisions to bubble up to the top and actions to trickle from the top downwards. With field managers spread in a geographically wide area, this is a singularly unsuitable way to manage a big state-wide Discom as a commercial enterprise. However, it is the only way governance is practical for a Discom that is less a commercial organisation and more a socio-political one.

The leadership position of Chief Executive / Managing Director / Chairman is all powerful and the appointment to this post is usually politically determined. Unfortunately, Discom leadership is transient – rarely is the top position occupied by the same person continuously for a period of five years: the typical tenure is under two years! Every new leader comes in with new ideas to solve the myriad problems faced by the Discoms. Each new idea typically tends to be a technical one; technology somehow is thought to have the ability to quickly provide a fix to the many problems. Rarely is there time to really diagnose what ails the Discom, yet solutions must be found quickly. People and processes always take a lot of effort and time to fix so an easy choice is technology.

Not having their own research departments, Discoms have little knowledge of technology and are reliant on vendors to educate them on technology. Vendors have little awareness of the structure, processes or culture within Discoms and have a vested interest in “pushing” their technology. Vendors do so to the buying department in the Discom organisation, their natural point of contact. Buying departments neither have the real world experience of field issues nor do they have the authority (or ability) over the field managers to cause change. Thus, technology choices are made either by transient leadership or by the buying departments based more or less on what catches their fancy at the time. There is no technical strategy worth the name.

Technology, once procured, runs into the concrete wall of field reality. That is when field managers start to complain about what has been bought and leadership starts to realise that the expected results are not being obtained. A blame game ensues and frequently the technology / vendor is caught in the mix. Ultimately a modus vivendi is found and life goes on, yet the Discom’s financial status does not improve.

The reduction in theft or energy losses in the Delhi distribution system are a fine example of the results of properly embracing technology. The privately owned Delhi Discoms chose electronic metering technology with a consistent strategic focus on driving down losses. Having installed electronic meters, they worked relentlessly with their staff, unions and contractors to ensure these meters were read electronically. They changed processes, put in place an IT infrastructure to accommodate electronic reads. They analysed the data brought back from meters to identify theft and network improvements. The benefits from new technology resulted in bringing the losses in Delhi down from ~50% to ~12% in just a few years. Loss reduction is not rocket science, but it does need the tenacity of leadership to work on people and processes.

The key lesson for the state run Discoms is not to chase technology for the sake of technology. When they do so, they will find that the long-term fix to huge losses is not better technology but better people and better processes that use the technology they already have. To fix people and processes needs leadership that endures for a period of time and is inclined to deal with these endemic issues. Today Discom leaders make decisions almost with the knowledge that they will not face the consequences of their decisions. The least governments can do is give their Discoms quality leadership that remains in office to see the results of its decisions.

ABOUT THE AUTHOR: Compos Mentis is Latin for “a sound mind.” This is the chosen pseudonym of a prominent European expert with more than 20 years of direct experience in metering, AMI and smart grid applications worldwide. The cloak of anonymity allows him to insightfully” pop the balloons” of conventional utility industry thinking. If you would like to comment on this Viewpoint, please write to the author at cm@smart-energy.com