July 02, 2023

Smart Electricity Metering Project: A Deceptive Theft

Sudip Dutta

THE Indian power sector has undergone a complex and challenging journey of anti-people, anti-national reforms in recent decades. . The Electricity Act of 2003 was introduced with the aim of reducing government intervention in the regulation of the electricity business, opening doors for potential privatisation. However, due to extensive and sustained resistance across the country, state-owned distribution companies (DISCOMs) continue to retain control over the majority of the electricity distribution sector.

As the distribution stage represents the final link in the electricity service chain and plays a crucial role in revenue collection, the Modi government, known for its anti-people stance, sought to deliver a severe blow to state DISCOMs shortly after assuming power in 2014 through the introduction of the Electricity (Amendment) Bill. However, these efforts encountered strong resistance. Despite facing opposition, the BJP government persistently made multiple attempts to pass the bill, with the most recent being the EA Bill 2022. It became evident that their intentions were to systematically dismantle state DISCOMs and thereby destroy the remaining aspects of public service orientation within the electricity sector. However, these efforts faced determined opposition from both power industry professionals and the people of India.

On June 1, 2021, the power ministry issued a notification to introduce the Market Based Economic Dispatch (MBED). This framework proposes the establishment of a centralised Day-Ahead Market (DAM), where sellers and buyers from across the country are obligated to submit their offers and bids. The Power Exchange would then unilaterally determine the dynamic Market Clearing Price (MCP) without any consultation or transparency regarding the mechanism to stakeholders. It is evident that this entire mechanism aims to compel generators and state DISCOMs to submit to a centrally-controlled market system, paving the way for large private players to exploit and manipulate the market using unscrupulous methods. This agenda ultimately seeks to take control of the Indian public power sector, while forcing state DISCOMs and State Load DispatchCenters into risky, high-priced, need-based real-time purchases.

However, it turned out to be a precursor to a malicious blueprint. In a planned assault on the public electricity sector, under the guidance of the World Bank (WB), the ministry of power, launched a highly detrimental smart metering project. This scheme was abruptly made mandatory, leading to the sudden withdrawal of all existing financial support schemes from the central government.

The dangerous Revamped Distribution Sector Scheme (RDSS) is designed to shift the entire burden of the accumulated debt in the electricity sector onto state distribution utilities, state governments, and all consumers. Consequently, this will result in a massive lack of access to electricity in rural areas. The scheme aims to segregate agricultural consumer lines from non-agricultural ones, creating an antagonistic environment and eliminating cross-subsidies. As a result, farmers will face water scarcity for irrigation, posing a severe threat to our country's food security.

Furthermore, this scheme will subject every consumer to market forces when it comes to electricity pricing, eliminating any safeguards or protection. Additionally, it will lead to a significant loss of jobs, as a large portion of the electricity sector workforce will be permanently affected. The scheme also facilitates the forced inclusion of private renewable energy sources (REs) into the energy mix, paving the way for the privatisation of the entire state distribution infrastructure at incredibly low prices. This desperate scheme serves as an alternative method to implement the oppressive clauses of the Electricity (Amendment) Bill without the need for parliamentary approval.

While the Revamped Reforms based and Results Linked Distribution Sector Scheme has an outlay of Rs 3,03,758 crore with an estimated gross budgetary support of Rs 97,631 crore from the central government, it clearly imposes a huge burden of Rs 2,06,127 crore on the consumers and state DISCOMs.  


The salient points of the reform guideline, as stated in the document, are as follows: demarcating and accounting for the exact electricity consumption by the subsidised categories; eliminating all forms of cross-subsidies in the name of Direct Benefit Transfer (DBT) (we are all aware of the impact of DBT on household LPG costs!); compelling State Electricity Regulatory Commissions to continuously enhance tariffs to reflect the ever-increasing electricity purchase cost, resulting in a tariff shock for poor consumers; introducing blatant market-profit driven corporate governance reforms; operating part or the entire area of DISCOM's supply through private participation; forcing state governments to establish electricity police stations to enforce disconnections and penalties on poor or defaulted consumers; and installing feeder, transformer, and consumer meters using public funds under the Total Expenditure (TOTEX) mode.

It is evident that under this scheme, every individual consumer will be required to pay a substantial amount of Rs 7,000-8,000 for the installation of prepaid smart meters. These meters have a maximum lifespan of approximately 7-8 years. Considering the estimated 26 crore consumers in India, this translates to a direct burden of Rs 26 X 8,000 = Rs 2,08,000 crore taken directly from the pockets of the people. It is worth noting that with just half of this cost, the entire distribution system's infrastructure could be upgraded, yet the conditions for grant approval practically guarantee minimal assistance from the central government.

The scheme claims to address the persistent issues of revenue realization gaps and technical and commercial losses. However, it is striking to see that the Central government has set targets for states to reduce the ACS-ARR gap from Rs 0.56/kWh to 0 and AT&C losses from 22 per cent to 12 per cent by FY 25 as a precondition to qualify for grants under this scheme. While these issues have long been prevailing and require comprehensive planning between generation, transmission, and distribution entities, the sudden and stringent introduction of this revamping scheme raises questions. 

The central government is increasingly pressuring state DISCOMs to participate in the virtual electricity market. Through the power exchange mechanism, a real-time dynamic market price for electricity is determined using algorithms developed by market agencies. Alarmingly, the volume of electricity transacted through power exchanges has seen a significant increase, with a Compound Annual Growth Rate (CAGR) of approximately 25 per cent from 2009-10 to 2021-22.

In reality, about 77 per cent of the financial burden faced by DISCOMs stems from the cost of power purchases alone. And the cost of power has been on an uncontrollable upward trajectory. On April 1, 2022, the regulatory commission directed power exchanges to set bidding prices within the range of Rs 0-12/kWh for both the day-ahead and real-time markets. However, market players created an artificial supply scarcity by abstaining from bidding, even at the highest sanctioned limit of Rs 12/kWh. This compelled the commission to increase bidding prices across all segments. A staff paper on pricing, prepared by CERC in October 2022, revealed that in March 2022, India witnessed a period of demand surge coupled with a supply shortage. The increased prices of fuel, particularly imported coal led to an abnormally high market clearing price, frequently touching Rs 20/kWh, i.e., the maximum quotable price. The problem was exacerbated by excessively high market prices and concerns regarding super-normal profits earned by infra-marginal generators.

Suddenly, the ministry of power proposed the introduction of a High Price Market segment (HP-DAM). Citing this proposal, IEX approached Central Electricity Regulatory Commission (CERC) to raise the price cap to Rs 99/kWh. Consequently, in an order dated February 16, 2023, CERC approved an upper price limit of Rs 50/kWh for the HP-DAM. Market pricing, in essence, serves as a devastating and exploitative mechanism to exploit consumers, as evidenced by the maliciously inflated price of Rs 50/kWh. Typically, the market clearing price corresponds to the highest bidding price. Therefore, any company can submit an exorbitantly high bid through its affiliated subsidiaries or sister companies, resulting in windfall profits through this manipulative mechanism.


One of the most concerning aspects is the provision of real-time data to market players through SCADA mechanisms via prepaid smart metering, communicable smart feeders, and DT-level metering. This data accessibility poses a significant risk as it can be exploited by private competitors to manipulate speculative market prices and selectively target regions that offer the highest profits. We have witnessed private players like Adani aggressively seeking parallel distribution licenses in Maharashtra, Uttar Pradesh, and other states, focusing on revenue-generating areas. With access to comprehensive consumption and billing data, which will be in the possession of private smart meter companies such as Adani, they can strategically apply for the most lucrative regions. The implementation of the Electricity (Amendment) Bill alongside smart metering will complete the destructive cycle of undermining public DISCOMs.

This scheme will establish a dynamic pricing system for individual consumers, directly linked to the real-time demand for household electricity. However, it is crucial to consider the potential vulnerabilities introduced by the underlying technology that controls data-smart operations. The integration of substantial IT and process impacts creates a heightened susceptibility to cyber-attacks. Even the World Bank, in its survey paper on the international experience of Advanced Metering Infrastructure (AMI), explicitly highlights the risks associated with smart metering technology. These risks include accidents leading to voltage surges that jeopardise the health and safety of utility personnel and customers, the potential for prolonged disruptions in electricity service delivery, the misuse of data for political purposes (raising concerns about the role of the BJP government in non-BJP states), and breaches of customer data privacy that can be exploited to attack residential or industrial networks and equipment.

Electricity stands as one of the most critical services in India, with its pricing still regulated to some extent by certain agencies, despite their limitations. In the year 2022-23, India produced a staggering 1,624.158 Billion Units of electricity, generating an average revenue of Rs 6/kWh. This translates to an ever-expanding market worth Rs 975 thousand crore per year. However, international finance capital, led by institutions like the World Bank, is fervently plotting to seize control of this market, subjecting every consumer to the whims of market forces.

It is imperative to understand that this scheme has no genuine association with network upgrades. Rather, it represents the final assault on India's public electricity distribution sector. It threatens the very foundation of India's federal structure. Some state governments have already begun rejecting this scheme, and electricity workers from various states are taking to the streets to protest against the imposition of smart metering. EEFI (Electricity Employees Federation of India) calls upon all electricity workers across the country, as well as workers, farmers, and the general public, to come together and resist this smart metering project.