Long leaps for discoms before they sign up for new reform scheme

Ghosts of mounting financial losses and worsening technical performance still haunt; discoms would need to walk many extra miles to become eligible for the new package

As state-owned power distribution companies (discoms) across the country are being pushed by the Centre to come on board for the new reform scheme, ghosts of the past mis-steps continue to haunt them. Be it mounting financial losses, or worsening technical performance, discoms would need to walk many extra miles to become eligible for the new package.

Here is a detailed picture of the current status of discoms and the bearing it will have on the prospects of their joining the new scheme.

Financial losses

The financial losses of the discoms have increased despite a reform scheme, UDAY, running for the past five years. While over 2018-19, the loss has declined marginally, the loss numbers depict a pre-Covid picture. Post Covid, the loss of discoms is expected to balloon.

Discoms continued the electricity subsidy during the Covid period with minimal recovery, as state finances took a beating during the pandemic. The dues of government departments to discom touched a record high of Rs 97,000 crore during FY21. Additionally, overdue subsidy amount by state government to discoms stands at Rs 60,000 crore.

High loss leads to delayed payment to power generating companies. As on September 29, 2021, the dues of discoms to gencos stood at Rs 98,449 crore. Delayed payment also led to coal demand-supply crisis, as claimed by the Centre.

 

The cost-revenue gap has remained more or less same as five years ago. It is supposed to be either zero or in negative.

Reforming discoms: two steps forward, one step backward

During the past five years, in which the UDAY scheme was being implementated, the loss of discoms declined at first, then rose again as spending on several infrastructure schemes kicked in, including universal electrification and metering. The data available publicly indicates loss figures only till FY20. Covid years would make these metrics worse.

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Several states have shown decline in loss, which could provide a breather to them as they apply for the new discoms reforms scheme. However, states such as Maharashtra (where loss has increased 20x), Telangana, Jharkhand, the path of revival looks difficult.

Covid shadow to worsen discoms health

The last scheme, UDAY, aimed at bringing down the national AT&C or operating loss to 15 per cent by 2019-20. It was 25 per cent in 2014-15. While there is a significant improvement in reduction, as AT&C stands at 20 per cent in FY20, the target is still far and in a certain perspective, five years delayed too.

The two metrics that denote healthy revenue generation – billing and collection efficiency have shown considerable but still unsatisfactory improvement. Under the new reform scheme, billing efficiency should be more than 90 per cent and collection efficiency more than 95 per cent.

Going forward, due to Covid impact, the situation is feared to worsen as discoms battle with low bill collections, rising subsidy amount, low recovery and cessation of grants under UDAY.

ALSO READ: Power discoms to get five more years to turnaround under new scheme  

Eligibility criteria for Rs 3-trillion discoms reforms scheme:

Discoms to publish quarterly un-audited and audited annual accounts

Discoms should clear their dues to power generating companies and transmission companies

Discoms should install prepaid meters in government offices.

State government to clear all government department dues and subsidy amount to discoms

State electricity regulatory commission to timely approve tariff revision and true-up tariff.

Discoms to submit action plan for loss reduction and infrastructure planning by December 2021.