Power distribution companies in these states suffer deep financial stress due to low demand, collections

By: |
August 17, 2020 6:21 PM

The absence of cost-reflective tariffs, rising operational expenditure, high AT &C losses, and delays in receipt of subsidy from the government have been adding pressure to the finances of state distribution utilities over time.

power distribution companies, discoms, electricity, pandemicDISCOM’s dues to the power generators rose to Rs 1.19 lakh crores in June 2020, which is a 22 per cent increase from February 2020 and a 63 per cent increase from June 2019.

Financial woes of power distribution companies do not seem to settle anytime soon as the cash flow problems for DISCOMS have further aggravated due to the fall in power demand and disruptions in the billing and collections. Nationwide lockdown in the months of March, April, and June, along with the intermittent lockdowns in various states have substantially pushed the outstanding dues of DISCOMs. Their dues to the power generators rose to Rs 1.19 lakh crores in June 2020, which is a 22 per cent increase from February 2020 and a 63 per cent increase from June 2019, Care ratings reported citing PRAAPTI. 

The outstanding dues, as of June 2020, were the highest for the DISCOMS of Rajasthan (Rs 34,971 crores), Tamil Nadu (Rs 18,077 crores), Uttar Pradesh (Rs 13,694 crores), Maharashtra (Rs11,399 crores), Telangana (Rs 7,180 crores), Karnataka (Rs 6,393 crores), and Jammu & Kashmir (Rs 5,865 crores). The DISCOMs of these seven states accounted for 82 per cent of the total outstanding dues owed to the power generators.

Also Read: Coronavirus drains out this much money from your pocket; people in these states lose most

The report suggested that the absence of cost-reflective tariffs, rising operational expenditure, high AT &C losses, and delays in receipt of subsidy from the government have been adding pressure to the finances of state distribution utilities over time. The AT&C losses of DISCOMS at the all India level are at 20.22 per cent, which is significantly higher than the target of limiting the losses to 15 per cent by FY19. Also, the ACS-ARR gap (average cost of supply and average revenue realised) at the national level is Rs 0.44/unit against the target of elimination of the gap by FY19.

Meanwhile, the performance of India’s power sector is likely to be subdued in the current fiscal due to the expected gradual and prolonged revival of domestic economic activity. Although there has been an improvement in electricity consumption and generation, the sustainability of the same would be contingent on the easing of the restrictions and resumption of economic activity, the Care ratings report added. 

Do you know What is Positive GDP growth seen in Q3, need to fight inflation: RB, Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1IMF projects impressive 11.5 per cent growth rate for India in 2021
2COVID-hit global economy projected to grow at 5.5 per cent in 2021: IMF
3India’s GDP to contract 8% in FY21: FICCI Survey