Sustainable DISCOMs Require Structural Fixes, Not Episodic Bailouts: Former Power Secretary PK Pujari

India’s energy transition is entering its most decisive phase yet, where decarbonisation, market reform and grid modernisation must advance together. In an interview with ENERGDIVE, former Power Secretary and ex-Central Electricity Regulatory Commission (CERC) Chairperson Pradeep Kumar Pujari lays out the structural shifts redefining the sector: from decentralised generation and real-time markets to the coming “UPI moment” in power. His insights point to an ecosystem moving toward data-driven governance, flexible system design and consumer-centric markets, the pillars on which India’s electric future will be built.

Having served both as Power Secretary and later as Chairperson of CERC, you have seen the entire reform continuum from policymaking to regulation. In your view, what has been the most transformative structural shift in India’s power governance over the past decade, and how has the interplay between policy and regulation influenced the pace and quality of reform delivery?

The disruptive technologies have necessitated the transformation of the structure of power sector governance the most in the last decade. Traditionally, there used to be a large generation, transmission and distribution. With renewables coming in, the generation has become largely decentralised and in many cases, consumers have become prosumers. At the same time, extensive digitalisation has given opportunity to every player the opportunity to actively participate in the power market by responding to the price signals.

Several transformative measures have been taken to put in place the required policy and regulatory ecosystem to address the challenges due to large-scale integration of renewable energy and facilitate the same and digitalisation. New markets and market products have been introduced. As the grid operation has become more complex, resource adequacy, flexible resources and RTC Power & FDRE have become key.

This was possible because policy and regulation began to work in tandem – policy set the direction, such as universal access, renewable push and distribution reforms, while regulation ensured predictability, enforcement and fair price discovery. The governance became data-driven. The objective is to institutionalise this alignment.

Reforms such as Security Constrained Economic Dispatch (SCED) and the Real Time Market (RTM) were designed to improve efficiency, competition, and system optimisation. From a regulatory vantage point, how effective have these measures been in deepening market liquidity and grid discipline, and what critical design or institutional gaps remain?

SCED has delivered lower variable-cost dispatch, resulting in better utilisation of thermal capacity. The RTM has given stakeholders the much-needed platform for balancing resources, resulting in improved grid discipline. At the same time, these have also resulted in more liquidity in the market. Going forward, co-optimisation could be an option for higher efficiency.

Is India striking the right balance between reliability, affordability and decarbonisation, especially with rural electrification, an ageing thermal fleet and grid stability concerns?

The trilemma of reliability, affordability and decarbonisation is a real challenge. The policy and regulatory measures are aimed at striking the right balance. India’s electricity portfolio will run a dual-track system for some time: rapid growth in non-fossil capacity with emphasis on FDRE and RTCRE, alongside flexible and efficient thermal for ramping and adequacy.

The priority is to encourage investment in pumped hydro, storage and flexible gas where viable, operational flexibility of the existing fleet, and resource adequacy. Rapid addition of renewable, preferably FDRE and RTC, retail tariffs reforms and targeted subsidies can deliver reliable and affordable electricity without compromising the decarbonisation objective.

Despite successive schemes, the distribution company (DISCOM) financial distress continues to constrain the entire value chain. In your view, what long-term reforms — tariff rationalisation, franchise models, direct subsidy transfers, or regulatory discipline — are most critical to restoring DISCOM viability and supporting the clean transition?

Sustainable DISCOMs require structural fixes, not episodic bailouts. Financial viability is the single biggest unlock for the entire value chain. I would recommend these actions on priority: AT&C loss reduction anchored in smart metering, feeder segregation and energy accounting; cost-reflective tariffs, timely true-ups and regulatory assets only in exceptional circumstances, that too with a clear roadmap for liquidation; tariff rationalisation, including Time-of-day tariffs & DBT of subsidies to insulate the vulnerable consumers, exploring PPP models for DISCOM operations, and capacity building.

As Vice Chair of the India Energy Stack (IES) Task Force, you are closely involved in shaping this pioneering Digital Public Infrastructure (DPI) for India’s power sector. How do you envision IES transforming grid management, market operations, and consumer participation? Could it become for energy what Unified Payments Interface (UPI) was for payments, a platform that unlocks transparency, interoperability, and innovation across utilities, regulators, and consumers?

The IES is conceived as DPI for the power sector. It will be open, secure and interoperable, so that utilities, regulators, market operators and consumers can share consented data, transact seamlessly, and innovate at the edge. IES can be seen as a ‘UPI Moment’ for the electricity sector: open APIs, unique identifiers for assets and transactions, and policy-grade data semantics enabling everything from automated settlements to consumer centric services and real-time system intelligence. The focus of the Task Force is on proving value through pilots, creating the ecosystem for scale, and ensuring that innovations flourish without fragmenting the core.

Technologies such as green hydrogen, battery storage, pumped hydro, and micro-grids are rapidly redefining the boundaries of the power system. How should regulatory frameworks evolve to facilitate adoption while ensuring cost fairness, reliability, and consumer protection?

Regulation should be principle-based and technology agnostic. For storage, clarity as to whether it is a separable asset class is important. For pumped hydro, long tenor contracting and site-specific incentives matter. For distributed resources, enabling aggregation and participation in markets with light-touch consumer protection is the key. For green hydrogen, initial regulation can focus on safety, interconnection standards and fair network access. Regulatory sandboxes can accelerate learning, which can facilitate framing appropriate policies and regulations.

As the energy mix becomes more dynamic with renewable & storage entering the system, how should tariff design evolve to balance consumer affordability, cost recovery, and investment incentives? Could differentiated tariffs, time-of-day pricing, or market-linked retail models be the next step in reforming electricity pricing?

Tariff design must evolve with the energy mix. As the renewable and storage scale increases, flat volumetric tariffs may not be the best option. Possible solutions could be Time of Day Tariff, Real-time Pricing for large segments, Capacity/Demand Charges that reflect the network costs, and Cost-Reflective Wheeling Charges for open access consumers. These have to be combined with DBT-backed tariff slabs to protect vulnerable lifeline households.

There is also a need to explore the possibility of moving towards a two-part retail tariff construct, a predictable subscription/network component and a dynamic energy component. Such an arrangement would tend to align the consumer behaviour with system needs, without impacting affordability.

India’s leadership in cross-border power trade is expanding through SAARC and BIMSTEC initiatives. What role do you foresee for India in building regional electricity markets, and what regulatory or infrastructure interventions are critical for enabling seamless cross-border trade?

A South Asian power pool is in India’s strategic interest. The building blocks are harmonised grid codes, transparent scheduling and settlements, bankable cross-border interconnections, and open access to markets for credible counterparties. With common market platforms and firm financial transmission rights, there can be a move from bilateral trade to a regional market, leveraging and monetising the diversity of resources across the subcontinent.

Even with progressive reforms, coordination among MoP, CEA, CERC, and SERCs remains challenging. What institutional reforms or capacity-building measures do you believe are essential to ensure coherence, predictability, and timely implementation across the policy-regulatory ecosystem?

Independent institutions with the required capability are important. There is a need for stronger analytics capacity across such institutions, with shared data backbones. In this background, coordination amongst such institutions becomes crucial. There is a need for an institutionalised secretariat and an inter-state coordination forum. There is also a need to put in place time-bound regulatory processes with measurable outcomes and carry out regulatory impact assessments for major changes. Regulatory certainty, predictability and consistency are essential for investors’ confidence.

Looking ahead, what are the three most important milestones that India’s power and regulatory ecosystem should achieve by 2035 in terms of market design, consumer empowerment, and clean energy integration to ensure both energy security and decarbonisation progress remain on track?

In my view, the three key markers would be: efficient distribution utilities with strong financial health, system adequacy with flexibility and strong consumer interface enabled by IES, and a deepened market with real-time, intra day, day-ahead, term-ahead and ancillary products.