The government is considering increasing the annual allocation for the Revamped Distribution Sector Scheme to Rs 180 billion in the FY27 Union Budget, scheduled to be presented on 1 February, according to people familiar with the matter.

Launched in 2021, the RDSS aims to transform India’s power distribution sector by improving efficiency and strengthening the financial sustainability of distribution companies. For FY26, the scheme was allocated around Rs 160 billion, and the proposed increase reflects the growing pace of smart meter deployment and persistent financial stress in the sector.

Officials said smart meter installations are gaining momentum, with around 150,000 meters being installed every month. With this acceleration, higher funding is seen as necessary to sustain implementation and ensure adequate capital availability. Power distribution companies continue to face significant financial pressure, with cumulative debt exceeding Rs 7 trillion despite multiple reform initiatives.

The proposed increase comes amid broader reforms in the power sector, including the Electricity Amendment Bill, which is expected to be tabled during Parliament’s budget session. The draft National Electricity Policy 2026 also proposes measures such as mandatory tariff revisions and index-based automatic annual tariff adjustments, while a group of ministers has suggested incentives for privatisation of distribution companies.

Experts argue that higher budgetary support is critical to speeding up smart meter deployment and strengthening capital flows. Smart meters enable accurate billing, reduce power theft, lower aggregate technical and commercial losses, and improve the financial health of distribution companies through real-time monitoring and prepaid billing systems. Adequate funding is also expected to enhance confidence among advanced metering infrastructure service providers by reducing execution and financial risks.

The RDSS was launched with a cumulative outlay of Rs 3 trillion to help distribution companies improve their financial health through smart metering and infrastructure upgrades. Although the scheme was initially planned to conclude by FY26, it has been extended until FY28 due to slower-than-expected progress in smart meter deployment. Of the targeted 250 million smart meters, around 52.8 million have been installed so far, while contracts for about 150 million meters have been awarded.

The scheme comprises two key components: financial support for prepaid smart metering and system metering, and upgradation of distribution infrastructure. The overall outlay includes contributions from the Centre and states, as well as financing from state-owned power sector lenders. The Centre alone plans to spend more than Rs 970 billion under the programme.

The power ministry recently reported that distribution companies have returned to cumulative profitability after more than a decade. In FY25, discoms recorded a net profit of around Rs 27.01 billion, compared with a loss of Rs 255.53 billion in FY24. The ministry attributed this turnaround to reform measures, including the RDSS.

The scheme also targets a reduction in aggregate technical and commercial losses to 12–15 per cent across India. While the original deadline was missed, losses declined to 15.04 per cent in FY25 from 17.6 per cent in FY24. Similarly, the gap between the average cost of supply and average revenue realised narrowed to 6 paise per unit, from 48 paise in FY24.