Financially weak discoms have an adverse impact in the overall power sector, where a number of private electricity generators are already under stress due to several reasons, including rising outstanding receivables from discoms.
State-run electricity distribution companies (discoms) reported financial losses of Rs 21,658 crore at the end of FY19, up 4.4% year-on-year, reversing the declining trend since the UDAY scheme for these entities’ revival was launched in November 2015. Worse, according to the provisional data furnished by 26 states/UTs, the aggregate technical and commercial (AT&C) losses — electricity units lost on account of pilferage — of their discoms stood at 19.1% at the end of FY19, while the target was to bring down these losses to 15% by FY19-end. In fact, there was a 0.4 percentage point increase in these losses from the level recorded a year earlier, reversing the downward trajectory seen till FY18-end (on a quarterly basis, the y-o-y reduction in AT&C loss continued till Q3FY19).
Also, discoms were losing 25 paise on every unit of electricity sold (ACS-ARR gap) at FY19-end, meaning they failed to meet another UDAY target which was to eliminate the gap by that date. The ACS-ARR gap had stood at 17 paise at the end of FY18.
UDAY scheme was meant to salvage debt-ridden discoms. 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.
Among the major states, the highest financial losses have been recorded by Telangana discoms (Rs 5,702.8 crore), followed by those in Jammu & Kashmir (Rs 4,218.1 crore), Tamil Nadu (Rs 4,154.7crore), Madhya Pradesh (Rs 2,734.8 crore) and Uttar Pradesh (Rs 2,575.9 crore). In terms of AT&C losses, the worst performers are Bihar (36.3%), Jharkhand (34.6%), Madhya Pradesh (31.4%) and Uttar Pradesh (24.6%). AT&C losses have actually increased in Punjab, Chhattisgarh, Madhya Pradesh, Tamil Nadu and Jharkhand from the levels recorded at the beginning of the scheme.
Financially weak discoms have an adverse impact in the overall power sector, where a number of private electricity generators are already under stress due to several reasons, including rising outstanding receivables from discoms. According to data available with the power ministry’s ‘praapti’ portal, the discoms’ dues to 17 generators surged 57.8% annually to Rs 24,579 crore by March 2019-end.
Discoms in 16 states had saved a substantial Rs 34,000 crore in the two years till December 2018 as UDAY mandated the state governments to take over around Rs 2.32 lakh crore of discom debts, resulting in a lowering of the interest rates to 7-8.5% from around 11-12%. Additionally, initial savings through lower power purchase cost, establishment cost and tariff rationalisation and improvement in billing efficiency also contributed to the loss reduction in the initial days of the scheme.
The financial losses of eight states/UTs smaller states could not be accessed. Audited data are publicly available only till FY16.