Prepaid power is not the silver bullet to solve problem of discom finances

The Union Finance Minister, while presenting the Budget 2020-21, urged states and union territories to replace all conventional electricity meters with prepaid smart meters over the next three years. Mentioning it in the budget speech was a symbolic nudge to an issue that has already gained traction. Last year, the Central Electricity Authority and the Ministry of Power (MoP) had envisaged a complete switch to prepaid smart meters.

Smart meters are the third pillar of the proposed technology-driven transition in electricity systems globally, in addition to renewable energy and energy storage technologies. Prepayment is an additional feature of these meters that has gained prominence in India, based on two hoped-for outcomes.

First, prepayment is seen as a remedy for the financial ailments of the electricity distribution companies (discoms), thus solving a long-standing problem. Second, consumers are expected to be empowered to plan consumption in an efficient manner, and be able to choose the supplier and tariff plan in a future multiple supplier system. Both are virtuous goals.

But will prepaid smart meters deliver on these promises? Is prepayment an effective disciplining technique? What are the political consequences of such a technological shift, given the barely concealed political context of electricity provision in India? There are at least three reasons to doubt the wisdom of a rush to smart meters and prepayment.

First, prepaid meters address only a small part of the problem of discom finances – non-payment of billed amounts. In fact, discom losses have two additional components: Line losses in the distribution network, and theft outside the meters, neither of which will be helped by smart meters.

Indian Express
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