Dues owed by power distribution companies (discoms) has gone up by more than 50 per cent to ₹80,000 crore, as government subsidy continues to get delayed.

The mounting debt is attributed to a combination of factors from inaccurate billing to high aggregate technical and commercial (AT&C) losses from leakages and non-collection of payments.

AT&C losses

In FY18, the actual AT&C losses of six discoms – Eastern Power Distribution Company of Andhra Pradesh, discoms of Telangana, North Eastern Electricity Supply Company of Odisha, Dakshin Vidyut Vitran Nigam Ltd of Uttar Pradesh and Uttrakhand Power Corporation Ltd – were higher than that of FY17.

Added to that, the widening cost of supply – average realizable revenue (ACS-ARR) gap, has resulted in an increase in power purchase costs. It is a measure of efficiency, wherein a higher gap indicates lower efficiency.

“This increase is absorbed by the discom as tariffs cannot be hiked,” said Rupesh Sankhe, Vice-President, Institutional Equity Research, Elara Capital.

Tariff hikes

Some of the discoms have dared to hike tariffs. According to India Ratings, in this fiscal, out of 29 discoms, 14 raised tariffs.

Inadequate or even nil tariff hikes by many discoms have led to revenue under-recoveries, resulting in a huge pileup of regulatory assets. Moreover, there is limited upside available for discoms for revenue growth as subsidising consumers (commercial and industrial categories) are already burdened with exorbitantly high tariffs, according to Ashwin B, Senior Analyst, India Ratings. Clearly, the under-achievement by several discoms in AT&C losses and ACS-ARR gap from targeted level is a cause for concern and requires urgent reconsideration of strategy, he added.

The government’s UDAY scheme, intended to bring relief to discoms has yet to make any significant impact. Only four discoms – Dakshin Gujarat, Madhya Gujarat and Uttar Gujarat and Bengaluru Electricity Supply Company Ltd have outperformed UDAY’s AT&C loss target in FY18.

However, some of discoms have seen some improvement in narrowing the ACS-ARR gap. In FY18, the discoms of Gujarat, Haryana, Uttarakhand, Maharashtra State Electricity Distribution Company Ltd, Bengaluru Electricity Supply Company Ltd and Mangaluru Electricity Supply Company Ltd were able to earn more than they spent per unit sold.

Mixed performance

While 20 discoms were able to reduce the gap from FY17 levels, the gap for nine discoms of Rajasthan, Bihar, West Bengal, Dakshinanchal Vidyut Vitran Nigam Ltd of Uttar Pradesh, Hubli Electricity Supply Company of Karnataka and North Eastern Electricity Supply Company of Odisha widened from FY17 levels.

The financial health of discoms can be discerned from the fact that Tamil Nadu Generation and Distribution Corporation Ltd’s (Tangedco) was downgraded by India Ratings on account of higher leverage due to liquidity stress in the absence of tariff revision, coupled with inadequate cash position.

Against the AT&C loss target of 13.5 per cent under UDAY scheme, Tangedco incurred 14.23 per cent loss.

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