Centre looking to ‘insulate’ discoms from payment delays

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Published: May 23, 2019 4:34:15 PM

As FE recently reported, UDAY discoms reported financial losses of `21,658 crore at the end of FY19, up 44% year-on-year, reversing the declining trend since the scheme for these entities’ revival was launched in November 2015.

Discoms, on the other hand, have to directly interact with the last consumer.

With state-run electricity distribution companies (discoms) missing key targets of the UDAY scheme, the government is looking at options to “insulate” these entities from the risk of delayed payments from bulk consumers such as local bodies and state government departments. Power ministry sources said that “these receivables of discoms are almost one and a half times their outstanding payables to generating companies”.

Discoms’ dues to power producers stood at `38,023 crore at the end of FY19, up 59.8% from a year earlier, and 65% of these were “over-dues” with a payment default of 60 days or more.

According to an internal power ministry note reviewed by FE, the central government’s plan to reduce the exposure of discoms from irregular payments include “installation of solar panels, and installation of prepaid meters on government buildings progressively”. It is also banking on the Kusum scheme, which envisages solarising agricultural feeders, to receive payments from state governments on time. “State government resources for subsidising agricultural electricity are likely to get freed up for electricity payments by the state government departments,” the note added.

As FE recently reported, UDAY discoms reported financial losses of `21,658 crore at the end of FY19, up 44% year-on-year, reversing the declining trend since the scheme for these entities’ revival was launched in November 2015. The much-touted scheme’s apparent unravelling is being attributed to rise in power purchase and establishment costs, low collection from remotely located consumers (especially after the household electrification drive under Saubhagya), inadequate tariff hikes, unpaid dues by government departments and slow subsidy disbursements by states.

Senior power ministry officials have pointed out that the risks of the power sector are not evenly distributed along the value chain, with upstream stakeholders such as coal producers, generating stations, transmission companies, being business-to-business entities which have many ways of passing through their costs. Discoms, on the other hand, have to directly interact with the last consumer.

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