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.
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.
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.