Coal shortage, state dues, higher salaries behind losses at discoms

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New Delhi | Published: February 15, 2019 5:54:32 AM

Shortage of coal at power plants, inadequate tariff hikes and rising operational costs after the 7th Pay Commission have been putting additional pressure on already hard-pressed electricity distribution companies (discoms).

coal, coal sector, coal industryIn a review meeting recently held here to map the progress of various schemes under the Union power ministry, discom officials also blamed the late subsidy disbursal of state governments for their increasing woes.

Shortage of coal at power plants, inadequate tariff hikes and rising operational costs after the 7th Pay Commission have been putting additional pressure on already hard-pressed electricity distribution companies (discoms).

In a review meeting recently held here to map the progress of various schemes under the Union power ministry, discom officials also blamed the late subsidy disbursal of state governments for their increasing woes.

At the end of the first half of FY19, all India aggregate technical and commercial (AT&C) losses — an indicator of losses due to pilferage and billing inefficiencies — stood at 22%, rising from 18.6% at FY18-end and making it nearly impossible to achieve the target of reducing them to under 15% by March under the Ujwal Discom Assurance Yojana (UDAY).

These losses, one of the primary reasons for the discoms being perennially in the red, were the highest in Bihar (38.9%), followed by Jharkhand (36.9%) and Uttar Pradesh (33.1%). AT&C loss of one percentage point translates to financial under-recovery of about `4,000 crore on a pan-India basis.

According to the minutes of the aforementioned meeting, reviewed by FE, power purchase cost in UP has risen 14% y-o-y to Rs 4.48/unit due to coal shortage, rise in coal and railway transportation cost and higher transmission charges. Rise in rural electrification has also hampered the discoms’ ability to collect payments, officials said. The state has also sought the central government’s intervention to recover outstanding dues from the state irrigation department.

Tamil Nadu also complained about rising power purchase costs stemming from coal shortage, as the state had to buy electricity from the spot market at higher rates in absence of coal at its power plants. The state purchased 379 million units of electricity from the exchanges in December, 283% more than the volume procured a year ago. Officials from Jharkhand pointed out that while the state government was not paying the discom on time, the 7th Pay Commission has caused ‘establishment costs’ to rise more than 200% to Rs 1.05/unit. Representatives of the Punjab discom said its establishment cost is high because of pension obligations to 45,000 retired employees, whereas its current workforce stands at around 35,000.

Establishment cost usually comprises 13% of discoms’ average revenue realisation.

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Officials from Punjab and UP said their respective electricity regulators had not raised power tariffs according to the trajectory agreed upon while signing into the UDAY, making it difficult to narrow the gap between their costs of supply and revenue realised. Outstanding dues from state government departments had jumped by 22% annually to `35,603 crore across the country in FY18. If gaps are not plugged soon, discoms will be facing harder times.

Power minister RK Singh has proposed in the new tariff policy that AT&C losses above 15% won’t be compensated for through tariffs after FY19, which means that discoms would not be compensated for their inefficiencies through higher consumer bills.

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