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The Aggregate Technical and Commercial (AT&C) losses of distribution companies (Discoms) fell to around 17 per cent in the last financial year, ended March 2022, compared to about 22 per cent in the previous year.
The AT&C loss and the gap between Average Cost of Supply (ACS) and Average Realizable Revenue (ARR) are key indicators of Discom performance. In the last 2 years, the AT&C loss of the Discoms was hovering at 21-22 per cent, according to a Power Ministry statement.
“Ministry of Power instituted a number of measures to improve the performance of utilities. Preliminary analysis of data for FY22 of 56 Discoms contributing to more than 96 per cent of input energy, indicates that the AT&C losses of Discoms have declined significantly to around 17 per cent in FY22 from around 22 per cent in FY21,” it added.
The reduction in AT&C losses improves the finances of the utilities, which will enable them to better maintain the system and buy power as per requirements; benefitting the consumers.
ACS-ARR Gap
The reduction in AT&C losses has resulted in reduction in the gap between the ACS and ARR). The ACS-ARR Gap (on subsidy received basis, excluding Regulatory Income & UDAY Grant) has declined from ₹0.69 per kilowatt hour (kWh) in FY21 to ₹0.22 in FY22.
The decline of 5 per cent in AT&C losses and 47 paise in the ACS-ARR Gap in one year is the result of a number of initiatives taken by the Ministry.
Policy initiatives
In September 2021, the Ministry revised the prudential norms of PFC and REC, the lending agencies for the power sector, to provide that loss making Discoms can avail financing from the agencies only after they draw up an action plan for reducing the losses within a specific time frame and get their State government’s commitment to it.
The Centre also decided that any future assistance under any scheme for strengthening of the distribution system by loss-making Discoms will be available only if it undertakes to bring its AT&C losses/ ACS-ARR gap down to specified levels within a specific timeframe and gets their state government’s commitment to it.
The Revamped Distribution Sector scheme (RDSS) lays down that funding under the scheme will be available only if the Discom commits to an agreed loss reduction trajectory.
The Ministry of Power made a series of presentations before the 15th Finance Commission as a result of which the 15th Finance Commission provided for an additional borrowing window to States contingent on their taking steps to reduce their Discom’s losses.
In June 2022, the Ministry issued Late Payment Surcharge (LPS) Rules which provide that unless the Discoms promptly pay for the power drawn from the ISTS, their access to the power exchange will be cut off. While putting all these in place; the Ministry of Power also worked with the distribution companies to provide the necessary finances under the RDSS for undertaking the loss reduction measures.
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