Dual power distribution model

Dual distribution model is basically to have two separate distribution lines focusing different consumers. The idea is to cut down losses from selling subsidized electricity to farmers and bring their financially-ill distribution utilities to profitability. The government is working on a proposal to replicate Gujarat’s “dual distribution model” in the power sector across Indian states.

In the Gujarat model, dual distribution lines were installed to supply power based on paying capacity of the consumers. The first line provided continuous electricity at a much higher rate, whereas the second line aimed at farmers supplied electricity for limited period at a subsidized rate. Gujarat was not only able to cut down the loss, but was able to report profit after they implemented dual distribution lines.

The strategy helped Gujarat Urja Vikas Nigam Ltd (GUVNL) — the holding company formed after the un bundling of the State Electricity Board (SEB) in 2003 — to shift its financial position from a loss of Rs 1,932 crore in 2003-2004 to a profit of above Rs 124 crore in 2007-08, the first year of the eleventh Plan period. Since then, profits have jumped five times to Rs 642 crore over five years ended March 12.

“Given the benefits, there is a consensus in the Forum of Regulators to replicate the model for separation of agricultural feeders (transmission lines) across states. The forum has been constantly discussing this proposal to insist upon states. If other states were to adopt the same approach, consumers will be able to get reliable power with no power outage and distribution utilities could return to profits thereby enabling investment in future projects,” a member of the Central Electricity Regulatory Commission (CERC) told Business Standard. FOR is a representative body of the state electricity regulatory commissions headed by CERC Chairman. The member also informed that the Form of regulators had recently commissioned a study on the matter.

FOR explained, as part of the initiative, the government is going to press for adequate metering of power supplied to the farming community. “This will also help us in identifying where exactly is the subsidy for farmers going. Over a period of time, cross-subsidy should go away and all users, at least rich farmers, have to pay at least the production cost of power,”

Supply of free or subsidized power to farmers, a politically sensitive issue, has resulted in losses for state power suppliers as cost of production increased because of rising fuel costs (coal and natural gas).In addition, industries are often forced to pay much higher to compensate for subsidy loss. In a bid to cut down transmission losses and optimize the distribution of power in the state in 2006, Gujarat had bifurcated the rural supply to give farmers an eight-hour supply at a cheaper rate for irrigation on a three-phase line and rural households were given 24-hour reliable power on a single-phase line.

This separation of agricultural feeders which use heavy loads of up to 10-15 Horse Power (HP) capacity for running pumps from domestic supply, resulted in additional revenue for the state from increase in duration of power supply to rural households apart from round-the-clock supply of power to consumers. The three-phase line for irrigation also helped in saving power, as the high-current lines trip in case illegal hooking takes place anywhere in the area.

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