Industrial and consumer segments traditionally contribute more than 70% of discoms’ revenue, but use about 50% of the overall electricity supplied.
Losses of state-run power distribution companies (discoms) are estimated to have surged to `90,000 crore in FY21, a report released by NITI Aayog on Tuesday.
Union power minister RK Singh recently said discoms’ losses were down 38% on year at `38,000 crore in FY20, mainly due to corrective actions like timely tariff revisions and improvement in billing and collection efficiency. The losses were expected to have risen again in FY21 owing to the pandemic disrupting the reform process that induced a certain discipline among these entities.
The report, co-authored by NITI Aayog and energy think tank RMI, recommended a host of measures, including providing greater autonomy to the discoms, timely tariff revisions, increasing competition in the business and larger involvement of the private sector to improve the health of these perennially distressed entities. “A robust and long-lasting solution to the woes of the discoms requires changes in policy as well as organisational, managerial and technological reforms,” RMI MD Clay Stranger said.
Experts have pointed that the revenue of discoms may have significantly dropped in FY21 with demand from high-paying industrial and commercial consumer segments getting disrupted amid the lockdowns to contain the coronavirus.
Industrial and consumer segments traditionally contribute more than 70% of discoms’ revenue, but use about 50% of the overall electricity supplied. On top of that, it was difficult for discoms to continue meter reading exercises and collect payments from consumers amid the lockdown, which had likely widened the gap between their cost of supply and revenue realised (ACS-ARR gap). The finances of the discoms would have been worse in FY21, had the Centre not announced the `1.25-lakh-crore loan package to clear the dues of power generators.
The losses had declined in FY17 and FY18, thanks to the UDAY scheme launched in November 2015, as governments of 16 states have taken over around `2.32-lakh-crore debt of their discoms, resulting in lowering of the interest rates on these loans to 7-8.5% from around 11-12% earlier. Discoms’ losses had surged 83% annually to `61,360 crore in FY19, mainly due to delayed subsidy disbursal by state governments, inefficient billing and tariff collection and inadequate tariff hikes.