Coronavirus lockdown to hurt finances of generators, discoms: Study

The nationwide lockdown to contain the spread of Covid-19 pandemic is set to magnify the already stressed finances of electricity generators and distribution companies (discoms), a study said.

As a fall-out of the lockdown, the finances of the discoms are impacted since they are not able to collect payments from consumers and in turn pay to the generators.

“State governments would further delay the release of subsidies. Given that usually most of the payments for past supply are collected/made towards the end of the financial year (March), the delays would have significant financial implications. Although since August 2019, states have been making monthly payments to generators after the power ministry made it mandatory for discoms to maintain LC (letter of credit) as payment security for power purchases, there exists sizeable past dues that are to be cleared. Further, the fall in demand would impact revenues of generators and distributors alike”, a power update report by CARE Ratings noted.

The financial profile of the state distribution utilities or discoms has not seen an improvement in 2019-20. The transmission and distribution losses and the outstanding dues of discoms have not seen a reduction during the year. The inability of states to hike tariffs, rising operational expenditure, high levels of outstanding dues and delays in receipt of subsidy from states has weakened the financial position of state distribution utilities.

The AT&C (aggregate technical and commercial) loss of discoms at the all India level at 19.1 per cent is above the UDAY (Ujwal DISCOM Assurance Yojana) target of limiting the losses to 15 per cent by FY19.

The gap between ACS (average cost of supply and average revenue realised (ARR) at the national level is Re 0.36 per unit against the target of elimination of the gap in FY19. The outstanding amount of discoms as on end January end as per data from Payment Ratification and Analysis in Power Procurement for Bringing Transparency in Invoicing of Generators (PRAAPTI) stood at Rs 88311 crore of which Rs 76192 crore (excluding disputed amount) was overdue. There has been a 27 per cent increase in outstanding amount since April 2019 and 42 per cent increase in the overdue amount.

“The domestic power sector is feeling the impact of the global spread of the virus and the resultant lockdowns. It has not only led to a fall in electricity consumption, but has impacted the supply of key inputs for generators which would lead to project delays and thereby time and cost overruns”, the report added.

The economic disruptions following the lockdown of the country to contain the spread of the virus has further dented electricity demand from the industrial and commercial sector in the country. Consumption of electricity has declined across states. The daily power demand in the country has fallen by 25 per cent since the middle of March when most parts of the country imposed restriction and shutdowns. Electricity consumption in the country fell from 3,494 million units on March 16 to 2,628 million units on March 28. The drop in consumption has been notably higher in the northern and western regions of the country – a fall of around 30 per cent. The southern regions have reported a decline of 19 per cent.