Electric power interruption is becoming a day to day phenomenon in our distribution system. For distribution system to be effective there should be less outage in the system and if fault occur these faults should be cleared as soon as possible. Sustained power interruption occurs several times a day from few minutes to hours. Interruptions may be due to failure of substation equipment or failure of distribution network elements. This paper attempts to identify different causes of interruption and problems that customers in Nepal have been facing due to frequent planned and unplanned sustained interruptions by evaluating various reliability indices and parameters of Lainchaur distribution substation and its associated feeders operated under Nepal Electricity Authority. First, reliability analysis of substation configuration only is done followed by analysis of reliability improvement measures like use of double bus bar, parallel distribution feeders and underground cables in DIgSILENT PowerFactory only considering sustained failures of equipment and feeders. Calculated reliability indices like System Average interruption Duration Index (SAIDI), System Average Interruption Frequency Index (SAIFI), Energy Not Served (ENS) are compared for different cases so that it will be easy to make choice between options to the utility to upgrade/improve the system. Considering all feeders, result shows that main cause of interruption in the distribution system is failure of distribution lines showing 104 interruptions for total duration of 107 hours per annum in the system, followed by failure of distribution transformers indicating 19 interruptions for total duration of 47 hours per annum. Simulation result in DIgSILENT shows yearly total ENS of distribution system is high due to present configuration, and can be reduced by the use of parallel feeders and underground cables respectively. It is seen that ENS due to failure of substation components only is very low and huge revenues can be saved if auto-reclosures are used or a provision of charging feeders as soon as possible is made.