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Delayed subsidy, poor billing inflated discom losses in FY19

According to the latest report, state governments released 89.4% of the subsidy booked by their respective discoms, significantly lower than the 95.6% disbursed in FY18.

Delayed subsidy, poor billing inflated discom losses in FY19
The worst performer in this regard wase Andhra Pradesh, which released only Rs 1,250 crore against the subsidy claim of Rs 6,052 crore made in the fiscal.

Delayed subsidy disbursal by the state governments, inefficient billing and tariff collection and inadequate tariff hikes were the main reasons behind the power distribution entities’ (discoms) financial losses surging 83% to Rs 61,360 crore in FY19, an analysis by PFC showed. Losses of five states — Andhra Pradesh, Tamil Nadu, Madhya Pradesh, Telangana and Uttar Pradesh — comprised 88% of the total discom losses in the country, PFC noted.

The difference between the cost of power supply and revenue realised (ACS-ARR gap) widened in all these five states in FY19, with them losing more money for every unit of electricity sold amid 7.5% growth in supply volumes, resulting in higher losses.

According to the latest report, state governments released 89.4% of the subsidy booked by their respective discoms, significantly lower than the 95.6% disbursed in FY18. The worst performer in this regard wase Andhra Pradesh, which released only Rs 1,250 crore against the subsidy claim of Rs 6,052 crore made in the fiscal. Discoms of Andhra Pradesh, traditionally known for their relatively better performance, reported a loss of Rs 16,736 crore in FY19, up from Rs 546 crore in the previous fiscal. According to the Electricity Act, 2003, states are required to release the subsidies – meant for the consumers but routed through the discoms – in advance.

Andhra Pradesh’s aggregate technical and commercial (AT&C) losses — an indicator of discom pilferage — increased more than 10 percentage points annually to 25.7% in FY19 as it collected only 80.5% of the tariffs billed to consumers. In FY18, the state’s collection efficiency was 92.3%. The state’s ACS-ARR gap spiralled to Rs 2.67/unit in the year from Rs 0.09/unit a year ago. Trying to justify the state’s move to unilaterally revise renewable energy power purchase agreements in mid-2019, Andhra Pradesh chief minister YS Jaganmohan Reddy’s recent letter to Prime Minister Narendra Modi had attributed the losses to “high cost renewable energy purchases”.

The state governments of Madhya Pradesh and Telangana have released 80% of the Rs 11,615 crore and Rs 5,652 crore subsidies claimed by their respective discoms.

Uttar Pradesh and Tamil Nadu, however, have cleared all the subsidies booked by the discoms, but the tariffs charged to the consumers in these states do not reflect the high cost of power procured by them. It was noted that Madhya Pradesh discoms billed only 72% of their consumers in FY19 and could collect revenue from only 88% of the billed consumers, widening the state’s ACS-ARR gap to Rs 1.30/unit from Rs 0.78/unit a year ago.

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