Discom losses seen doubling to Rs 58,000 crore in FY21

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Published: June 6, 2020 2:45 AM

Discoms are also expected to end up owing lenders a staggering Rs 4.5 lakh crore by the end of this fiscal, recording a 30% annual rise, and deteriorating their credit profiles.

It was difficult for discoms to continue meter reading exercises and collect payments from consumers amid the lockdown.It was difficult for discoms to continue meter reading exercises and collect payments from consumers amid the lockdown.

Losses of state-owned power distribution companies (discoms) are seen to be around Rs 58,000 crore in the current fiscal because of lower revenue generation amid muted power demand due to the lockdown, analysts at Crisil Ratings said. Losses in FY20 were to the tune of around Rs 30,000 crore, according to an estimate.

Discoms are also expected to end up owing lenders a staggering Rs 4.5 lakh crore by the end of this fiscal, recording a 30% annual rise, and deteriorating their credit profiles.

It was difficult for discoms to continue meter reading exercises and collect payments from consumers amid the lockdown. On top of that, muted industrial operations took a toll on their finances as these high-paying consumer segments contribute more than 70% of discoms’ revenue, but use about 50% of the overall electricity supplied.

This is seen to widen the gap between cost of supply and revenue realised (ACS-ARR gap) for discoms. “Higher costs and constrained cash inflows amid declining demand mean the per-unit operating gap of discoms will widen to 83 paise per unit by the end of this fiscal,” Manish Gupta, senior director, Crisil Ratings said. The ACS-ARR gap currently stands at Rs 0.37/unit. “Cash losses this fiscal may almost double to Rs 58,000 crore over last fiscal,” the agency pointed.

The government has announced an R 90,000-crore loan package for discoms to battle the coronavirus crisis. Funds will primarily be used to clear the dues of power generators. However, Crisil noted that “this would be a temporary stitch at best”, and higher cash losses could lead to “payables re-inflating sans incremental funding or state support”.

Going by the unaudited information provided by the states, discoms’ financial losses stood at more than Rs 27,000 crore at the end of FY19. According to audited data, discoms losses fell 13.2% to Rs 33,365 crore in FY18. Discoms traditionally face cash-flow issues because state electricity regulators infrequently and inadequately raise consumer tariffs. Dues from state government departments and local civic bodies, pegged at a whopping Rs 50,000 crore at the end of September 2019, also significantly impair the discoms’ ability to turn around.

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