These states giving cheaper electricity to consumers despite missing UDAY targets

By: | Updated: March 6, 2019 3:04 AM

Punjab, where too delayed subsidy disbursal to the discoms was a major issue last fiscal, has allocated a massive `8,969 crore to subsidise agricultural electricity in FY20.

Bihar has reduced FY20 allocations to its energy department by 25% to Rs 8,894 crore while Jharkhand has cut the same by about 4% to Rs 5,323 crore.

While the operational targets set under the UDAY scheme for the revival of electricity discoms are being missed and the efficacy of the scheme itself has come under a cloud, several state governments are putting further burden on these entities by unveiling various sops for different sections of consumers, including farmers and households and not compensating them adequately.

Bihar, Uttar Pradesh and Jharkhand have cut down on the budgetary allocations to their respective energy departments in FY20 by 25%, 18% and 4%, respectively from the levels in the previous year, a move that could hit the discoms’ ability to strengthen the network to cut pilferage and improve the efficiency of tariff collection.
Chhattisgarh has announced a flat 50% discount on power bills to consumers who use below 400 units of electricity in a month. Maharshtra government that has been delaying payments to discoms — government departments’ dues to the state’s discoms rose 31% year-on-year in H1 FY19 to `6,084 crore — has continued with massive power subsidies and budgeted for another `5,210 crore to subsidise electricity to industry and agriculture in FY20, and the discoms are worried if the funds will reach them on time.

Punjab, where too delayed subsidy disbursal to the discoms was a major issue last fiscal, has allocated a massive `8,969 crore to subsidise agricultural electricity in FY20.

Delayed disbursal of such subsidies leads to discoms spending more on interest costs against borrowings done to compensate for their working capital shortfall.

As FE reported recently, financial losses of the state-owned discoms have increased by 36% year-on-year to `15,080 crore in H1FY19; in fact, these losses were as much as the losses incurred by them in the whole of the previous financial year. State-level electricity regulators are not sticking to the trajectory of tariff increases agreed on while signing up for UDAY; only 17 states have increased their tariffs for FY19 compared to 22 for FY18.

At the national level, cross-subsidies — additional tariffs paid by industrial and commercial consumers to subsidise households and farmers — too have been on the rise, comprising 9% of the total revenue in FY15 to 12% in FY17.

Also, AT&C losses of discoms in 26 states and UTs were at 19.7% at the end of December 2018, down only 0.7 percentage point from the level recorded a year earlier. The target to reduce these losses to 15% by the end of March 2019 is clearly going to be missed by a significant margin.

Uttar Pradesh has reduced its FY20 budget expenditure for the energy department by about 18% (from FY19 revised estiamate) to `26,503 crore even as its power purchase costs have gone up by 13% to `4.48/unit in H1FY19. The discoms’ AT&C losses are rising with payment collection efficiency deteriorating with rising rural electrification. Their regulatory assets (the revenue shortfall resulting from inadequate tariff hikes) were a massive `33,000 crore at the FY18-end and the state government departments also owed them another `12,166 crore at the end of September, 2018, up 19% from a year ago.

Bihar has reduced FY20 allocations to its energy department by 25% to `8,894 crore while Jharkhand has cut the same by about 4% to `5,323 crore.

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