As discom losses continue downward spiral, power secretary bats for better governance

The performance report showed that aggregate losses for distribution utilities increased from Rs 29,452 crore in 2017-18 to Rs 49,623 crore in 2018-19. Losses excluding regulatory income and revenue grant under UDAY increased from Rs 59,588 crore...

NEW DELHI: Revenue deficit of state power distribution companies has risen to the worst in nearly a decade, while other financial indicators are also bleak. The pandemic will only lead to a further loss.

Power secretary Sanjiv Sahai said discoms need to be governed properly. “In many cases, unbundling of discoms did not achieve what it was meant to. Discoms are still not at arm’s length from their governments. Many states assume electricity is largesse to be distributed, but the political price of power has to be seen separately from its economic price. We are not asking states to stop giving free power. But someone has to pay for it,” he said.

The situation is particularly grim in Tamil Nadu, Andhra Pradesh and Telangana, which subsidise consumers but haven’t raised tariffs for years. Tamil Nadu Generation and Distribution Corp (Tangedco) has the same electricity tariff for six years but until 2018-19, posted a loss of Rs 12,623 crore over a revenue gap of Rs 1.32 per unit, showed a report on performance of 104 state power utilities for 2018-19.


It showed the all-India gap between average cost of supply of power and average revenue has increased to 72 paise per unit in the latest report, against 0.53 paise per unit in 2017-18. The number is closer to 76 paise in 2011-12, the highest in this decade, after which the Appellate Tribunal for Electricity issued an order mandating regular tariff revision. In 2015, when the Ujwal Discom Assurance Yojana (UDAY) was launched, revenue gap was 0.59 paise.

The performance report showed that aggregate losses for distribution utilities increased from Rs 29,452 crore in 2017-18 to Rs 49,623 crore in 2018-19. Losses excluding regulatory income and revenue grant under UDAY increased from Rs 59,588 crore in 2017-18 to Rs 85,803 crore in 2018-19. National aggregate technical and commercial losses stood at 22%. The aggregate networth of discoms is negative at Rs 80,567 crore.

As per a rating exercise of 41 power distribution companies recently concluded by Power Finance Corp, the number of distribution companies found below average operational and financial performance capability has increased to 21.
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In the previous rating exercise, 11 discoms were found to be below average, low and very low.

In the latest exercise, which is yet to be made public, seven discoms were found to be moderate in performance, while 13 were found to be of very high and high capability. In contrast to this, previous rating found nine distribution utilities to be moderate and 16 to be high and very high in financial performance.

The latest survey, yet to be released, ranks Tamil Nadu at the lowest, preceded by Eastern Power Distribution Co of Andhra Pradesh, Assam Power Distribution Co, Meghalaya Power Distribution and Manipur State Power Distribution Company.

Sources said cost coverage ratio for 23 discoms of the 41 discoms ranked remained low due to higher expenses and non-cost reflective tariffs. Haryana, Gujarat, Kerala, Himachal Pradesh, Assam discoms and Mangalore Electric Supply Company Ltd were the best performers on cost coverage ratio.
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Under the Indian Constitution, power is a concurrent subject and the responsibility for distribution and supply of power to rural and urban consumers rests with the states.

The central government has launched a Rs 90,000 crore liquidity injection scheme granting loans to distribution companies to pay their power bills. The government also proposes to launch a Rs 3 lakh crore scheme for infrastructure upgradation, which mandates privatisation of participating distribution utilities.
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