 "Government moots stringent evaluation for power discoms")
As power demand touched record levels during the last financial year, the cost of electricity for the power distribution companies (discoms) escalated, and so did their debt for meeting their working capital needs. Power demand grew at 8.9 per cent between financial year (FY) 2021 and 2023, as against 4.3 per cent between FY14 and FY20.
In the latest annual integrated rating and ranking of power distribution utilities by the Ministry of Power, it said the growth in power demand and global geopolitical challenges resulted in “an unprecedented increase in national power purchase costs of 71 paise per unit in FY23.”
The report said the power price escalation was caused by two reasons: the rise in quantum and price of imported coal. “With coal stock depleting at power plants, the government had to take steps to meet the growing power demand, resulting in a significant increase in coal imports. Coal imports in FY23 reached 56 million tonnes per annum (MTPA), which was more than double the 27 MTPA imported in FY2026. The coal price in the international market increased substantially during FY22 and FY23, driven by the Russia-Ukraine war and demand surge in countries like India, China,” said the report.
According to the report, the average cost of imported coal for India rose to over Rs 12,500 per tonne in FY23 from Rs 8,300 in FY22 and Rs 4,300 in FY21, primarily driven by a rise in Indonesian coal prices that constitutes the majority of the imports.
The rise in power demand also led to an increase in power prices in spot power trading exchanges. “Average exchange prices rose from Rs 4.69 per unit in FY22 to Rs 6.06 per unit in FY23. The rise was much more prevalent in summer months with Q1 prices rising from Rs 3.14 per unit in FY22 to Rs 7.86 per unit in FY23,” the report said.
As discoms pushed all buttons to meet the demand, their total debt rose to Rs 70,000 crore for funding their capital expenditure, working capital requirement, and operational losses. According to the report, five states (Andhra Pradesh, Maharashtra, Rajasthan, Tamil Nadu, and Telangana) accounted for over 89 per cent of the debt increase for the nation. Uttar Pradesh was also among the top five contributors for capex, and its discom was the largest recipient of equity infusion of over Rs 6,500 crore.
The report said higher debt raised in a high-interest rate environment pushed up the average interest rates. “The gap between average cost of supply (ACS) and Average rate of return (ARR) of sale of electricity for the discoms widened to 55 paise in FY23, pushing the absolute cash gap to over Rs 79,000 crore,” the report highlighted.
However, the analysis also pointed out that the aggregate technical and commercial (AT&C) losses (or operational losses) during the year fell from 16.2 per cent to 15.4 per cent, driven by a one-percentage-point increase in billing efficiency. It said 43 out of 67 utilities saw an improvement in their AT&C losses, with 13 utilities recording a greater than 5 per cent improvement.
