Discom drama: Audited losses double, back to pre-Uday levels

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Updated: Jul 08, 2020 5:41 PM

To revive discoms, the Centre is currently planning to introduce a new scheme which aims to cut AT&C losses to pan-India levels of 12-15% and eliminate ACS-ARR gaps by FY25.

Icra had predicted discoms’ FY21 losses at Rs 50,000 crore, based on the projected loss of Rs 30,000 crore in FY20.

Financial losses of state-run power distribution companies (discoms) jumped 83% in FY19 to a level numerically even higher than in FY15, the year before the UDAY scheme for their revival was put into effect. According to the PFC-audited data reviewed by FE, state-run discoms in the country suffered combined losses of Rs 61,360 crore in FY19, more than double the figure of Rs 28,036 crore put out by the Union power ministry earlier, compiling reports from the discoms.

The audited figures for FY18 also showed the discoms’ losses were more than double the level earlier reported at Rs 33,365 crore (see chart). The losses had stood at close to Rs 57,000 crore in FY15.  The audited figures corroborate the fact that the UDAY scheme, launched in November 2015, had had a short-term, sub-optimal positive impact on discoms’ financial health, but it failed to avert a relapse in FY19. The situation might have worsened further in FY20.

While the losses incurred by the discoms in FY20 were reported by the power ministry at around Rs 30,000 crore, the actual figure could be more than double that level, according to industry experts conversant with the finances of various state discoms.  The UDAY bailout scheme, of course, was linked to certain performance parameters and involved a fiscal forbearance for states.

According to rating agency Icra, lower power demand and logistical constraints in discoms’ revenue collections due to the coronavirus lockdown is seen to increase their losses by 66% in FY21. Icra had predicted discoms’ FY21 losses at Rs 50,000 crore, based on the projected loss of Rs 30,000 crore in FY20.

The UDAY scheme that ran between November 2015 and March 2019 aimed to reduce aggregate technical and commercial (AT&C) losses of discoms to 15% and eliminate the gap between cost of supply and revenue realised (ACS-ARR gap). According to the latest PFC report, AT&C losses were 22.01% and ACS-ARR gap was Rs 0.52/unit at the end of FY19. In FY16, when the scheme was launched, AT&C losses were 23.9% and the ACS-ARR gap was Rs 0.65/unit. The FY19 ACS-ARR gap for Andhra Pradesh, which has made the highest losses, was at a whopping Rs 2.67/unit.

To revive discoms, the Centre is currently planning to introduce a new scheme which aims to cut AT&C losses to pan-India levels of 12-15% and eliminate ACS-ARR gaps by FY25. Under the new scheme, every discoms will have to come up with a loss reduction plan of their own and the Union government will disburse loans and grants depending on the performance of the utility, as measured by result indicators and reforms undertaken. The scheme will subsume the existing Central government programs for the electricity sector such as the Integrated Power Development Scheme (IPDS) and the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY).

As an immediate measure for discoms to cope with the coronavirus crisis, the Centre has come up with a Rs 90,000 crore PFC-REC loan package which will be used to clear the dues of power generators. While the losses incurred by the discoms in FY20 were reported by the power ministry at around Rs 30,000 crore, the actual figure could be more than double that level, according to industry experts conversant with the finances of various state discoms. The UDAY bailout scheme, of course, was linked to certain performance parameters and involved a fiscal forbearance for states.

According to rating agency Icra, lower power demand and logistical constraints in discoms’ revenue collections due to the coronavirus lockdown is seen to increase their losses by 66% in FY21. Icra had predicted discoms’ FY21 losses at Rs 50,000 crore, based on the projected loss of Rs 30,000 crore in FY20.

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