India's power distribution sector is undergoing a critical transformation with the rollout of smart grids and the adoption of Advanced Metering Infrastructure (AMI). Launched under the Revamped Distribution Sector Scheme (RDSS) in June 2021, these efforts have already yielded visible improvements. Aggregate Technical and Commercial (AT&C) losses for discoms have declined from 20.73% in FY20 to 17.6% in FY24, primarily driven by better billing and collection efficiencies. Billing efficiency rose from 82.5% in FY23 to 83.6% in FY24, while collection efficiency increased from 96.1% to 96.4%.

Despite these gains, the rollout of smart meters—key to enhancing operational efficiency, reducing power theft, and improving demand forecasting—remains sluggish. As of January 2025, only 20 million smart meters have been installed, significantly behind the ambitious target of 250 million by March 2026. CARE Edge Ratings forecasts that only 25% of this goal will be achieved by the deadline, largely due to delays in government support, consumer resistance, and operational bottlenecks.

The government’s smart metering initiative presents a $20-25 billion opportunity and is backed by an estimated investment of Rs 1.25 trillion, comprising Rs 950 million in debt and 25% equity. Despite sufficient manufacturing capacity—around 100 million meters annually—only Rs 33.08 million of the Rs 453.04 million in approved budgetary support had been disbursed by March 2024. This lag in financial support is a key impediment to execution.

The Direct Debit Facility (DDF), meant to ensure timely payments to AMISPs, faces challenges due to low digital payment adoption in several states. Additionally, only a handful of states are leading in installations—Bihar accounts for 6 million, or about 30% of the total, while Uttar Pradesh, despite being a major target due to high AT&C losses, is lagging in execution.

CARE Edge Ratings estimates that improved billing and collection efficiency through smart meters could generate an additional Rs 4 trillion in revenue for discoms over the next seven years. However, meeting this potential depends on timely policy support, improved consumer awareness, and enhanced coordination between discoms and technology providers.

Although AT&C losses have reduced significantly from 30.5% in FY2007 to 17.6% in FY24, and the ACS-ARR gap narrowed from Rs 0.72 per unit in FY19 to Rs 0.21 in FY24, a zero-loss scenario remains a distant goal. Accelerated smart meter deployment, combined with proactive state-level implementation, capacity building, and financial incentives, will be crucial in achieving long-term sustainability for India’s power sector.