Defying the intent of the Ujwal Discom Assurance Yojana (UDAY) aimed at improving the financial health of debt-laden electricity distribution companies (discoms), the aggregate technical and commercial (AT&C) losses of these entities have shot up over the past year after a gradual drop achieved since FY15. According to the UDAY portal, AT&C losses reported by 24 states were 23% at Q3FY18, compared with 20.3% in FY17. With this, meeting the key UDAY target of reducing the AT&C losses to 15% by FY19 now looks very unlikely.Apart from the usual suspects such as Jharkhand, Bihar and Uttar Pradesh, the major states with high AT&C losses now include Punjab, traditionally known for low pilferage and theft. Its AT&C losses have shot up dramatically from 17.6% in FY17 to 32.6% in Q3, FY18. The jump was mainly because of non-receipt of subsidy from the state government but the transmission and distribution losses also stood at a high level of 13%.
After UDAY was implemented in November 2015, AT&C losses at the national level had fallen 1.8 percentage points to 23.9% in FY16. While the figure for 24 states were made available for FY17, the losses were pegged at 20.3%.Sources in Punjab State Power Corporation (PSPL) told FE that out of the subsidy of around Rs 9,000 crore approved by the state electricity regulator for the current financial year, the discoms have received only about Rs 3,200 crore.Irregular subsidy disbursal by state governments has been identified as one of the major factors behind discoms’ woes. Apart from creating working capital issues, these delays also disrupt the overall chain of power business with the rise in pending receivables of power producers selling electricity to discoms. As reported by FE earlier, payments delayed beyond a 60-day window, from discoms to seven IPPs at September-end was a whopping Rs 8,033 crore. With other IPPs also facing similar problems, industry experts estimate that dues of at least Rs 20,000 crore to these companies were unsettled.
Disciplined AT&C loss reduction is a critical feature in improving the financial conditions of the discoms. It is in the benefit of the states to improve the discom accounts as, according to UDAY, they will have to take over the future losses of discoms in a graded manner. Only the discoms of Gujarat, Himachal Pradesh, Karnataka, Tripura, Uttarakhand, Goa and Puducherry were able to meet their AT&C loss targets in FY17. In fact, AT&C losses in seven states had increased from their FY16 levels. Under UDAY, financial losses of the discoms in 24 participating states have fallen by Rs 14,685 crore, or 28.5%, annually to Rs 36,905 crore in FY17, thanks to savings of around Rs 15,000 crore made through lower interest costs. State governments of 16 states have taken over around Rs 2.32 lakh crore debt of their discoms as per UDAY conditions, resulting in a lowering of the interest rates to 7-8.5% from around 11-12%.