Standard Operating Procedures(SOPs) for States/DISCOMs to ensure compliance

of Pre-qualifying criteria under Revamped Distribution Sector Scheme (RDSS)

1. Introduction

1.1. Transformation of the power distribution sector is crucial to the

viability and sustainability of the Indian power sector. With the
objective of expediting reforms in the power distribution sector,
Government of India has launched the Revamped Distribution Sector
Scheme (RDSS). This is aimed at improving the financial condition and
operational efficiencies of state-owned DISCOMs. It is also recognized
that the strict compliance of the pre-qualification criteria of the RDSS
is a bed rock for success of the scheme and therefore, it is of utmost
importance that all the stakeholders work in tandem to meet the
broad objectives of the scheme and adhere to the
guidelines/instructions issued as part of the scheme.

1.2. RDSS is a result linked evaluation scheme. It is mandatory for

DISCOMs to meet the pre-qualifying criteria every year before the
funds can be released under the scheme. It is imperative for DISCOMs
to follow certain procedures and method to be able to become eligible
for the funds under RDSS. It was observed that many of the DISCOMs
are not consistent in their approach to adhere to the mainly following
PQ criteria:

1) State Government to ensure 100% payment of subsidy for the

previous year and advance payment of subsidy up to current
period in line with section 65 of EA2003 and wipe out the
remaining subsidy amount by the end of the project period.

2) No. of days Payables to Creditors including Gencos for the year

under evaluation is equal to or less than the projected trajectory as
per results evaluation framework.

3) DISCOMs will have ensured that no new Regulatory Assets have

been created in latest tariff determination cycle.
 4) All Government Departments/ Attached Offices/ Local Bodies/
Autonomous Bodies/ Boards/Corporations have made 100% payment
of current electricity dues for the year under evaluation.

1.3. In this regard, these Standard Operating Procedures (SOPs) for

States/DISCOMs are being issued under RDSS which will help Ministry
of Power, Nodal Agencies, State Governments and DISCOMs achieve
and monitor the targets set for themselves under the scheme in time
bound manner. States and DISCOMs are required to make changes in
their policies and procedures to align with the SOPs prepared on the
following areas:

PQ criteria SOP Relevant

Clause

State Government to ensure 100% 100% timely payment of 3.1

payment of subsidy for the previous Subsidy on the basis of
year and advance payment of subsidy correct subsidy accounting
up to current period in line with section mechanism
65 of EA2003 and wipe out the
remaining subsidy amount by the end
of the project period
No. of days Payables to Creditors includingLinkage of no. of days Payables
3.2
Gencos for the year under evaluation for power purchase with
is equal to or less than the projected LPS Rules
trajectory as per results evaluation Automatic pass through of fuel
framework. 3.3
adjustment cost to achieve
financial sustainability
through elimination of
ACS-ARR gap

DISCOMs will have ensured that no No new creation of regulatory 3.4

new Regulatory Assets have been assets and treatment of
created in latest tariff outstanding regulatory
determination cycle. assets

All Government Departments/Attached Mechanism to ensure 100% 3.5

Offices/ Local Bodies/Autonomous payment of Government
Bodies/ Boards/Corporations have department dues
made 100% payment of current
electricity dues for the year under
evaluation
2. Salient features

2.1. The purpose of these Standard Operating Procedures (SOPs) is to

ensure that States/DISCOMs adopt practices that will improve their
operational and financial performances so that they achieve full
compliance of pre-qualification criteria of RDSS scheme.

2.2. The parameters covered under the SOP are based on the major
areas of concern for the States/DISCOMs that directly and indirectly
impact in achieving the prequalifying conditions of RDSS.

2.3. These identified parameters are based on the outcome of regular

review and monitoring of States/DISCOMs under RDSS with respect to
prequalification compliance and trajectory of targets mentioned in
REF.

2.4. The framework adopted in this SOP is necessary for true and full
compliance of each of the parameters with respect to prequalification
of RDSS along with defined responsibilities of relevant stakeholder.

2.5. The Standard Operating Procedures (SOPs) sets down the process
that shall be followed by all States/UTs for accessing funds under the
RDSS or any other scheme of the Ministries of Power and NRE or any
loans from PFC and REC.

3. Standard Operating Procedures (SOPs)

3.1. 100% timely payment of Subsidy with correct subsidy accounting mechanism

Comprehensive and accurate subsidy accounting systems are critical for a

sustainable power distribution sector. Proper measurement of energy flow
to various voltage levels would allow determination of revenue leakages
as well as help in proper accounting of subsidies. States/DISCOMs shall
follow following steps to enable proper energy and subsidy accounting:

3.1.1 Tariff determination and Subsidy declaration

i. DISCOM(s) to mandatorily file Tariff Petition for the next financial
year along with true-up petition of the penultimate year within
prescribed timelines so
 that the Tariff Order is implemented with effect from beginning of the
next financial year

ii. Tariff petitions to mandatorily ask SERC to determine tariff on full

cost basis without considering any tariff subsidy from the State
Government. If required, the State may issue directions under
Section 108 of the Electricity Act to the concerned SERC/JERC to
implement such a system w.e.f. FY 2022-23. States, where tariff
orders have been issued for the year FY 2022-
23 without full cost tariff, shall ensure that revised tariff petition is
filed immediately.
iii. State Government to declare tariff subsidy, as it deems
appropriate for each of such consumer categories separately on
per unit basis for energy charges and/or per kW basis (only
applicable for fixed charges subsidy envisaged, if any)as per
Format 1 enclosed in Annexure-I.

3.1.2. Measurement of energy supplied to Subsidized categories

iv. No electricity connection should be released without metering as

per extant law and accordingly assessment of energy supplied to
subsidized category of consumers to be computed on measured
energy through proper metering only. In case of agriculture
category, where consumer level metering has not been adopted,
energy may be measured at DT level through proper metering of
DTs.
v. In case of dedicated agriculture feeder supplying energy to
agricultural consumers, energy measured at feeder level through
proper metering shall be considered. [The consumption reflected in
feeders shall be adjusted for normative T&D losses as determined
by SERC for determination of subsidy.]
vi. For mixed feeder, till such time feeders are segregated, total
energy shall be measured at feeder level and energy consumed by
non–agricultural consumers shall be deducted to arrive at energy
consumption of agricultural
 consumers. [The consumption shall be adjusted for normative T&D
losses as determined by SERC for determination of subsidy.]
vii. In no case, shall the assessment of energy on the basis of
contracted load, per HP basis, flat tariff, lumpsum or any other
such parameter be considered for computing energy supplied to
subsidized consumers for assessment of subsidy amount.
viii. Further, all DISCOMs shall migrate from flat rate billing to energy
per unit rate billing for consumers other than agricultural category,
within a period of six months from the date of issue of this SOP.

3.1.3. Subsidy billing and collection by DISCOMs

ix. DISCOMs to assess consumer category-wise tariff subsidy to be
provided by the State Government in advance based on the sales
forecast and per unit subsidy rates announced by the State
Government.
x. DISCOMs to share the quarterly subsidy disbursal plan with the
State Government and intimate the State Government to release
the subsidy amount in advance for each quarter.
xi. State Government to release the assessed subsidy amount in
advance to DISCOM(s) for every quarter within the first 15 days of
the quarter.
xii. At the end of every quarter, DISCOM(s) to compute actual subsidy
due based on energy supplied to separately for each subsidized
category of consumers (assessed on the basis of actual
measurements- through energy meters) and per unit subsidy
applicable to respective category of consumers as declared by
State Governments as per clause 3.1.1 and 3.1.2 and provide
accounts to the State Government about the subsidy disbursed
and balance with it.
xiii. Till all the subsidized consumers are metered as per clause
[Link] unmetered flat rate based subsidized consumption,
DISCOMs to assess subsidy requirement with the following
formula:
 Subsidy amount = [(Full cost tariff determined by the SERC/JERC * measured
energy consumption as per clause 3.1.2) – (no. of unmetered flat rate based
subsidized consumers * flat rate tariff)]
xiv. DISCOM(s) to raise bill of subsidy due to Finance Department of
State Government on quarterly basis net of advanced subsidy paid
for the quarter with a copy to the concerned SERC/JERC and Nodal
Agencies. This exercise shall be complete along with necessary
billing and collection details within 60 days of end of the relevant
quarter.
xv. Finance department to ensure the balance payment of reconciled
subsidy of the last quarter within 15 days of receipt of the subsidy
bill from the DISCOM for the last quarter. The advance subsidy
payment of the next quarter shall be paid as per clause3.1.3 (xii)
and it shall not be linked with the settlement of the subsidy bill of
the previous quarter (refer Format 2ofAnnexure-I).
xvi. DISCOM(s) to mention both per unit full cost tariff and subsidy
provided by the State Government on the consumer bills.
xvii. On completion of installation of 100% smart prepaid metering as
per RDSS timelines, State/DISCOMs may aim to move from
quarterly subsidy billing and reconciliation exercise from Quarterly
to Monthly basis.
xviii. An annual reconciliation activity shall be carried out at the end of
financial year by the DISCO for all the claims during the year,
which shall be completed within a period of 2 months of the expiry
of the relevant financial year.

3.1.4. Reporting related

xix. DISCOM(s) to submit complete subsidy accounting report as per

the process mentioned in the clause 3.1.1, 3.1.2 and 3.1.3 to the
respective Nodal Agencies within 60 days of end of each quarter
xx. DISCOM(s) to report the annual energy audit and periodic energy
accounting and communicate the same to the Bureau of Energy
efficiency and respective Nodal Agencies.
Illustration
Computation of Advance Subsidy (1st Quarter – April to June)
Sr. Category Forecasted Subsidy Subsidy Amount
No. Energy (Rs.)
Supply (Kwh) Rate
(Rs/Kwh)
Domestic 3000 6000
Agriculture 6000 24000
Small Industries 1000 2000
Total 10000 32000

DISCOMs to raise the advance subsidy bill to State finance department by 31st of March as per
above illustration. State Government to release the advance subsidy by 15th of April.

At the end of quarter, DISCOM to raise subsidy bill for the quarter based on actual energy
supplied to the subsidized consumers as per following illustration.
Computation of Quarterly Subsidy as per actual energy supplied
Sr. Category Energy Subsidy Subsidy Amount
No. Supplie (Rs.)
d (Kwh) Rate
(Rs,/Kwh)
Domestic 2800 5600
Agriculture 6500 26000
Small Industries 1000 2000
Total 10000 33600
Advance Received 32000
Net Amount of 1600
Payable Subsidy
(4-5)

DISCOM has to raise the net subsidy bill of Rs1600 to state finance department by 31stJuly. State
Government to pay the balance subsidy amount by 15th August.

3.2. Linkage of no. of days Payables for power purchase with LPS Rules

Delay in payment to power generating companies by the DISCOMs creates

major bottleneck in the entire value chain which leads to situations
like fuel shortage,
power shortage, working capital challenges and load shedding. RDSS
mandates to liquidate all the Genco Over Dues by the DISCOMs and in this
regard following SOP to be followed:
i. Revamped Distribution Sector Scheme (RDSS) has a parameter
under the Pre-Qualification criteria to ensure timely payment of
dues to the Creditors including Gencos wherein is a trajectory for
“No. of days Payables to Creditors including Gencos”. With
notification of Electricity (Late Payment Surcharge and Related
Matters) Rules, 2022, the already finalized trajectories shall
automatically get replaced with the ones finalized under
Electricity (Late Payment Surcharge and Related Matters) Rules,
2022.

ii. Nodal Agencies to get these changes reflected in the RDSS

Results Evaluation Framework and sign supplementary
agreements with the DISCOMs and States accordingly by 15th
July 2022.
iii. States/ DISCOMs whose proposals are yet to be approved under
the RDSS shall also align their trajectories in accordance with
these rules.
iv. DISCOMs to make the payment of dues to a generating company
or Transmission Company or a trading company as per the
Electricity (Late Payment Surcharge and Related Matters) Rules
2022 issued by the Ministry of Power. Report in this regard to be
submitted to Nodal Agency on regular basis as per Format 3 of
Annexure-I.

v. DISCOMs to submit updated status of the Genco Dues as per the

quarterly accounts (prepared by the DISCOMs as per prescribed
formats under RDSS) to the respective Nodal Agencies within
60days of every quarter. This shall be reconciled with the
information provided by Gencos on PRAAPTI Portal.

Note– The Central Government has notified the Electricity (Late Payment
Surcharge and Related Matters) Rules, 2022 on 03rd June 2022. It is
applicable to outstanding dues of generating companies, inter-state
transmission licensees and electricity trading licensees.
3.3. Automatic pass through of fuel adjustment cost to achieve financial
sustainability through elimination of ACS-ARR gap

One of the main reasons for financial stress for DISCOMs is the widening
ACS-ARR gap. There are multiple reasons which contribute to such a gap.
However, States/Regulators/DISCOMs have to work in tandem to bridge
this gap and bring it to zero. This is one of the most critical evaluation
criteria of RDSS. Amongst other, measures to be adopted by
States/DISCOMs for elimination of ACS-ARR gap, following steps need to
be taken:
i. All States/DISCOMs to create a mechanism for automatic pass
through of fuel cost adjustment on monthly/quarterly basis in retail
tariffs without the need for any prior approval
ii. All such changes shall be reconciled at the true-up stage by the
DISCOMs
iii. DISCOMs to ensure that the ACS-ARR gap follows a downwards
trajectory on quarter-to-quarter basis and it must not increase
again after meeting the target set under REF of RDSS

3.4. No new creation of regulatory assets and treatment of outstanding

regulatory assets

Uncovered revenue gap recognized by the State Regulatory Commission

but not considered for tariff determination to avoid revision in retail tariff
creates liquidity issues for DISCOMs. Creation of the so-called absolutely
undesirable regulatory assets is one of the factors for widening ACS-ARR
gap which subsequently impacts the financial sustainability of the
DISCOMs. It is paramount to address issues related to regulatory assets to
achieve financial viability of DISCOMs and is one of the focus areas of
RDSS scheme. In fact, there is no provision for anything like Regulatory
Assets in law and therefore creation of any such assets shall not be
permissible. In this regard, following SOP to be followed:
 i. States/DISCOMs to ensure any regulatory assets/uncovered revenue
gap created in the past are liquidated in seven years in accordance
with the Tariff policy by Ministry of Power dated 28th January 2016
ii. States/DISCOMs to ensure that no new Regulatory Assets/uncovered
revenue gaps are created in future as per the Tariff Policy
iii. States/DISCOMs, which are part of RDSS, to include liquidation of
existing regulatory assets/uncovered revenue gap under financial
sustainability category with adequate weightage in the Result
Evaluation Framework.
iv. States/DISCOMs, which are not part of RDSS, to outline a road map
for liquidation of regulatory asset and convey to Ministry of Power.
v. DISCOMs to submit implementation status of liquidation of
Regulatory Asset annually to Nodal Agencies and Ministry of Power
as per Format 4 in Annexure-I.

3.5. Mechanism for 100% payment of Government department dues

Pending Government department dues which also include dues of Urban

and Rural local bodies has become one of the major reasons of the
financial distress of the DISCOMs. This forces the DISCOMs to seek
incremental working capital loans(beyond what is admissible by SERC’s)
to manage their cash-flows for meeting their payment obligations and
creates a vicious cycle of debt and cash-flow management. RDSS focuses
on liquidation of Government department dues in a timely manner.
Following SOPs to be followed:
i. All the Government Departments should be put on pre-paid
metering in the first phase of the smart metering program as
committed in the REF of RDSS

ii. DISCOM(s) to ensure that total electricity consumption details are

recorded for all Urban Local Bodies (ULBs) and Rural Local Bodies
(RLBs) as per the energy meters and periodic electricity bills are
raised to respective ULBs and RLBs.

iii. States/DISCOMs to ensure that a centralized system/mechanism at

State/ DISCOM level is established for payment of electricity bills
of Government
 departments including ULBs & RLBs till the time prepaid meters are
installed in all Government departments.

iv. In case of non-payment within 30 days of bills being raised by the

DISCOMs, DISCOMs shall raise the cumulative electricity dues of all
ULBs and RLBs to the Finance Department of the State.

v. Finance Department should make the payment to the DISCOM(s)

within 30 days of raising the consolidated bill duly adjusting the
same against the devolution of grants to ULBs/RLBs.

vi. DISCOMs to submit monthly report on number of Government

Department put on prepaid, status of dues of Government
Departments including ULBs and RLBs to Nodal Agencies and
Ministry of Power as per Format 5of Annexure-I.

4. Adoption and review

4.1. The SOP as mentioned above shall come into effect from the date of
release. All States/DISCOMs shall submit adherence report on above
SOPs to Nodal Agencies on periodic basis in the Formats attached in
Annexure-I.

4.2. The SOP will be reviewed and amended if required, to reflect

necessary updates and improvements.

4.3. DISCOMs have to ensure implementation of the above SOPs at the

earliest to access funds under RDSS.

4.4. Nodal agencies shall be responsible for a strict follow-up and

compliance of these SOPs.
 Annexure 1
Format 1- Full cost tariff determined by SERC/JERC (Annual submission)
Full cost tariff Subsidy announced
Consumer Category
determined by by the State
SERC/JERC Government
(Rs/kWh) (Rs/kWh or kW)
(1) (2) (3)
Category 1
Category 2
Category 3

Format 2 –Subsidy billing and collection(Quarterly submission)

Total Actual
Actual Difference in
Per unit Subsidy advance electricity Reconciled
subsidy Advance
declared by Total subsidy supplied subsidy
Cons required and
the State Energy Amount based on bill raised
ume from the Actual
Government Forecaste raised to measureme to the
r State subsidy
d the State nt through State
Cate Governme
Government meters* Governme
gory nt
nt
(Rs/kWh) (MUs) (Rs. Cr.) (MUs) (Rs. Cr.) (Rs. Cr.) (Rs. Cr.)
(1) (2) (3) (4) = (2) * (5) (6) = (2) * (7) = (6) (8)
(3) (5) –
(4)
Category 1

Category 2

Category 3

*For unmetered flat rate subsidized consumption –> Subsidy amount = [(Full cost tariff *
measured energy consumption as per clause 3.1.2) – (no. of consumers * flat tariff)]

Format 3: Payables for power purchase from GENCOs as per LPS Rules (Monthly
submission)
No. of EMI amount for Date of Balance Bill raised Payment Date of
installmen clearing last outstandi by made payment
ts for outstanding EMI ng dues GENCO against for
GENCO Accumulated clearing dues paid for which for bills for Reportin
Dues -> till Previous outstandin EMIs Reportin Reporting g Month
Month g dues as created at g Month Month
per LPS the end of
Rules Reporting
Month
Rs. Cr. No. Rs. Cr. Date Rs. Cr. Rs. Cr. Rs. Cr. Date
GENCO 1
GENCO 2
GENCO 3
Format 4: Treatment of Regulatory assets (Annual submission)
Unit Accumulated as on 31st March
Parameter
of the previous financial
Year
Outstanding RA/Uncovered Revenue gap Rs. Cr.
RA/Uncovered revenue gap liquidated Rs. Cr.
Balance RA/Uncovered revenue gap Rs. Cr.
RA/Uncovered revenue gap created (if Rs. Cr.
any,
however it is not allowed as per the
guidelines)

Format 5: Payment of Government department dues (Monthly submission)

Unit Cumulative Reporting Month1
Parameter
till Previous <MMM-YY>
Month
Percentage of prepaid metering %
in
Government departments
Outstanding Rs. Cr.
Government
department dues
Total payment Rs. Cr. <payment <payment
receivedfromGovernment against dues till against dues of
department previous reporting
month> month>
Outstanding dues of all ULBs Rs. Cr.
and RLBs
Total Payment received from Rs. Cr. <payment <payment
ULBs and RLBs against dues till against dues of
previous reporting
month> month>
Bills raised to the Finance Rs. Cr.
Department of the State as
mentioned in clause 3.5 (iv)
Payment received from Finance Rs. Cr.
Department of the State against
the bill raised
1
Reporting Month or Year is the Month or Year for which the information is provided