India : Meghalaya Power Distribution Sector Improvement Project

Energy / Electricity transmission and distribution

The Meghalaya Power Distribution Sector Improvement Project will strengthen and modernize the power distribution network, reduce technical and commercial losses, and improve the power quality of the distribution network in Meghalaya State. The project will enhance the institutional capacity of Meghalaya Power Distribution Corporation Limited (MePDCL) by (i) supporting the preparation of a distribution sector road map, including financial sustainability measures to improve MePDCL's planning capability and financial performance; (ii) introducing innovative components in project design; and (iii) building MePDCL's capacity to monitor the environmental and social impacts of projects. The project will also support pilot testing of gender and socially inclusive renewable mini grid energy systems, which have the potential for future replication.

The project is aligned with the following impact: 24x7 power for all households, industries, commercial businesses, public needs, and other electricity consuming entities achieved. The project will have the following outcome: efficiency, reliability, and quality of power supply to consumers at distribution level in Meghalaya improved.

(i) Output 1: Distribution network in Central, East Garo Hills, and West Garo Hills strengthened and modernized. To improve the reliability of power supply to rural electricity consumers and reduce technical losses, the project will (i) construct 23 new 33/11 kV substations, and renovation and modernization of 45 33/11 kV substations, including control room equipment and protection systems; (ii) install 136 auto-reclosers and 597 fault passage indicators at 11 kV and 33 kV lines; (iii) install and upgrade 2,214 kilometers (km) of 33 kV and 11 kV distribution lines; and (iv) renovate the rural distribution network to support mini grid in generation in three selected villages.

(ii) Output 2: System for meter reading, billing, and collection improved. To reduce commercial losses, the project will replace existing outdated electromechanical meters with smart meters targeting about 180,000 households (about 29% of consumers), and a new meter-testing laboratory will be installed and commissioned. The project will also implement a smart metering scheme with online meter reading, billing, and collection with automatic disconnection and reconnection of services for up to 75,000 consumers. The project will also be used to evaluate the technical and commercial feasibility for MePDCL in extending smart metering across the state in the future.

(iii) Output 3: Capacity of executing agency to plan and implement distribution sector projects strengthened. This will include support for (i) preparation of a distribution sector road map that will outline immediate, medium-term, and long-term investments, strategies, and policies to systematically develop the distribution sector to meet future system demands and service standards; (ii) preparation of a financial road map to support MePDCL in achieving financial sustainability through financial improvement action plans in meeting UDAY Financial Restructuring Plan (FRP) targets, separating the financial and human resources functions of MePDCL from MeECL, and strengthening their internal audit systems; and (iii) implementation support to effectively monitor the project and ensure its technical, procurement, and safeguard compliances as required. The road maps and implementation support aim to develop MePDCL's technical and financial capacity to systematically plan, design, and manage the distribution networks.

(iv) Output 4: Efficient and productive use of gender- and socially-inclusive mini grid energy systems pilot-tested and promoted. Renewable energy mini grids will be pilot-tested in the villages of Lower Jambal, Dilma Ading, and Kosigre, and in three selected schools in the villages. The mini grids will improve power quality and support income generation, especially for women and other socially disadvantaged groups, using indigenous energy resources. The villagers will be engaged in income-generating activities and provided with relevant skills training, start-up capital, and support for market linkage. The project will conduct awareness-raising sessions for villagers and students on mini grids and their productive use with support from a JFPR grant.

The state economy. Meghalaya is a state in northeastern India with a population of about 3 million that shares its border on the north and east with the state of Assam, and on the south and west with Bangladesh. Meghalaya has the highest rainfall in India, recording an annual average of 12,000 millimeters. About 70% of the state is covered with forest. Meghalaya has some of the densest tropical rainforests in the country, and therefore constitutes one of the most important ecotourism destinations in India. Meghalaya's economy is predominantly agrarian and has a significant commercial forestry-based industry. The state has abundant natural resources, including mineral deposits (such as coal, limestone, granite, and clay), and offers significant opportunities for investment. In fiscal year (FY) 2019, the primary sector (agriculture, forestry, mining, and quarrying) contributed 25.92% of gross state domestic product; the secondary sector (hydropower, agro-based and food processing, chemicals, and allied industries) contributed 16.83%; and the tertiary sector, which is the fastest-growing sector, driven by trade, hotels, real estate, finance, insurance, transport, communication, and other services, contributed the remaining 57.25%. Despite its rich resource endowments and tourism potential, industry in the state continues to lag behind other states because of its poor infrastructure facilities. With an average annual per capita income of

90,213, Meghalaya is one of the poorest states in the country and in the northeastern region. Meghalaya is also one of the few states in India that, despite having surplus availability, have low per capita electricity consumption of 832 kilowatt-hours (kWh) against the national average of 1,122 kWh in 2017.

Power sector overview. Under the Meghalaya Power Sector Reforms Transfer Scheme 2010, the state government unbundled the Meghalaya State Electricity Board into four separate companies along with their physical assets, properties, liabilities, obligations, and staff. The four successor companies are (i) Meghalaya Energy Corporation Limited (MeECL), the holding company; (ii) Meghalaya Power Generation Corporation Limited, the generation utility; (iii) Meghalaya Power Transmission Corporation Limited, the transmission utility; and (iv) Meghalaya Power Distribution Corporation Limited (MePDCL), the distribution utility. Although the companies were officially unbundled, the lack of independent finance and administrative functions, together with poor financial management and planning capacity of subsidiaries, hinders them from progressing towards financial sustainability.

Meghalaya had a total installed generating capacity of 613 megawatts (MW) in June 2018, of which 426 MW was generated from hydropower (355 MW owned by the state utility and 71 MW from the central allocation), and the remaining 187 MW was from thermal-based generation capacity from the central government allocation to Meghalaya State. Meghalaya draws upon this central allocation to meet winter season deficits. Peak demand in FY2017 reached 399 MW and is expected to reach 470 MW in FY2021. Additional generation capacity is required to achieve Meghalaya's 24X7 Power for All initiative, which aims to bring an uninterrupted supply to each consumer in the state, even under the normal load-growth scenario. Meghalaya has surplus generation capacity during summer because of high hydropower availability and low demand, but it experiences a capacity deficit in winter because of high demand and low hydropower availability.

Power distribution issues. Although Meghalaya achieved 100% electrification for rural and urban households (635,802 consumers) in February 2019, the voltage at consumer premises drops below the allowable limit of 6% of the rated voltage during peak load periods. Further, power interruptions of more than 6 hours per day are common in remote rural networks. The average aggregate technical and commercial (AT&C) losses of the distribution network in 2017 were 32.65%. AT&C losses attributable to three of the six circles of the Meghalaya distribution network (Central, East Garo Hills, and West Garo Hills) are estimated to be more than 50%. Further, the existing distribution network is overloaded. Most of the 33/11 kilovolt (kV) substations in rural areas have outdated technology and lack control rooms, making it difficult to operate the system, particularly during heavy rains and mist that are prevalent year-round in many parts of the state. MePDCL's billing efficiency is only 67.35% as about 75% of the consumer meters installed by MePDCL are outdated, resulting in high commercial losses. High AT&C losses, aged distribution assets, and subsidized tariffs for the poor and agricultural consumers are the major reasons for the below-cost revenue recovery that has led to the poor financial state of the distribution utility. The huge capital requirements to develop the aged infrastructure, and the subsidized tariff in rural areas make rural electrification less attractive to the private sector.

Government programs for the distribution sector. 24X7 Power for All Meghalaya was a joint initiative of the Government of India and the state government of Meghalaya to provide an uninterrupted, quality, reliable, and affordable power supply to all domestic, commercial, agricultural, and industrial consumers (footnote 5). MePDCL also signed an agreement with the Ministry of Power and the state government of Meghalaya under the Ujwal DISCOM Assurance Yojana (UDAY) scheme to reduce its AT&C losses from 34.76% in FY2015 to 15.00% by FY2020. This was to be achieved through various central government supported schemes, such as (i) the Integrated Power Development Scheme; (ii) Deen Dayal Upadhyaya Gram Jyoti Yojna; and (iii) Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya). Although Meghalaya achieved 100% electrification through the Saubhagya scheme, the implementation of measures identified under other schemes is progressing slowly because of lack of sufficient funds. The project will help MePDCL implement some of these measures, such as metering, network strengthening, and billing efficiency improvement. Without the proposed intervention, AT&C losses are projected to exceed 42% by 2024.

24x7 power to all households, industry, commercial businesses, public needs, and any other electricity consuming entity achieved

Efficiency, reliability and quality of supply for distribution consumers in Meghalaya improved

Distribution network in Central, East Garo Hills and West Garo Hills strengthened and modernized

System for meter reading, billing and collection improved

Capacity of executing agency to plan and implement distribution sector projects developed

Efficient and productive use of gender- and socially inclusive mini grid energy systems pilot-tested and promoted