Execution delays in smart electricity meter projects to hit returns: Crisil

Crisil Ratings says slower installation of smart meters and payment delays under the RDSS scheme could reduce the internal rate of return for AMISPs by up to 150 basis points

A slower pace of smart meter installation under the Revamped Distribution Sector Scheme (RDSS) and delayed payment realisation may reduce the project internal rate of return (IRR) of advanced metering infrastructure service providers (AMISPs) by up to 150 basis points, Crisil Ratings said in a report.

 

“This is assuming an execution delay of six to twelve months against budgeted timelines and a delayed payment cycle of six months against an expectation of less than one month continuing over the entire ten-year period. A Crisil Ratings study of players installing over 60 per cent of smart meter projects awarded so far indicates as much,” the agency said.

 

Execution lag and delayed payments impact project returns 

The Smart Meter National Programme aims to replace 25 crore conventional meters with prepaid smart meters by March 2026. Under the programme, distribution companies (discoms) award ten-year contracts to AMISPs, who then purchase and install meters on a piece-meal basis within 24–30 months and provide operation and maintenance (O&M) services for the remaining period.

 

In return, discoms pay AMISPs lump-sum amounts upfront towards partial recovery of capital expenditure. Discoms also make fixed monthly payments per meter for the remaining contract tenure. However, the rollout has been slower than expected, with only 2.56 crore of the total 12.3 crore awarded meters installed as of July 2025. If implementation had been on schedule, about 6 crore meters should have been installed by now.

 

Delays could lower cash flow and project viability 

“Slower pace of installation can impact project returns by up to 60 bps. This is mainly because delay in meter installation can result in deferment or withholding of both recurring and lump-sum payments by discoms. All of these delays lower the present value of future cash flows,” said Ankit Hakhu, director, Crisil Ratings.

 

The delay in installation has been attributed to factors such as challenges in securing the right of way, lack of consumer awareness, operational issues faced by AMISPs, and deferred inspections by discoms for commissioning approval.

 

Cost escalation risks and supply chain mitigation 

Implementation delays may also lead to higher project costs due to rising smart meter prices during the lag period, further aggravating the impact on IRRs. Key components, including printed circuit boards and semiconductors, are largely imported, making costs sensitive to global price changes.

 

Crisil noted that supply chains are currently stable and major project cost escalations appear unlikely. Bulk purchasing and piecemeal procurement strategies are being adopted by AMISPs to mitigate these risks, the report added.