Govt may give private sector larger role to improve Discoms’ health

Twesh Mishra New Delhi | Updated on July 29, 2019 Published on July 29, 2019

Another round of Discom reforms under UDAY 2 on the cards

Worried over the financial health of the state-owned power distribution utilities and the less-than-anticipated success of revival schemes, the government may consider more private participation as an alternative.

This was hinted recently by the newly appointed Power Secretary SC Garg when he said, “We have made several attempts in the past to find public sector solutions for strengthening the power sector. I think we have to look for increasing private sector solutions for improving the health and performance of Discoms.” He was commenting on the progress under UDAY 1 (Ujwal Discom Assurance Yojana).

“There are several very important issues here. Distribution reforms, finances of the power sector, getting the generation projects going...there are some places where the PPAs (Power Purchase Agreements) are being questioned, we have to bring stability to the sector,” Garg added while highlighting the focus areas during his term. The first leg of Discom debt restructuring and loss reduction measures achieved about half of its intended goals, according to data compiled by the Ministry of Power.

According to data on the UDAY portal, the Aggregate Technical & Commercial (AT&C) losses for States and Union Territories averaged at 18.2 per cent in financial year 2018-19, a 2.6 percentage point reduction. Under the UDAY scheme, the goal was to attain an average AT&C level of 15 per cent by fiscal 2018-19.

AT&C loss is a combination of energy loss (a sum of technical loss, theft, inefficiency in billing) and commercial loss (a sum of default in payment and inefficiency in collection) incurred by the Discom.

The portal is updated with data shared by the State governments and Union Territories that have participated in the UDAY scheme launched in November 2015.

The Centre has now announced that another round of Discom reforms is in the offing under UDAY 2. But the AT&C gap should not be looked at in isolation to assess the progress of UDAY 1.

Discoms’ losses down


According to officials, Discoms were annually booking losses of around ₹60,000 crore before the UDAY 1 reforms kicked in. These losses have now been reduced to around ₹23,000 crore per annum.

The health of Discoms was affected by lower tariff hikes, more expensive cost of power, and hikes in coal and rail freight charges. The Discoms were also impacted by building up of regulatory assets due to higher disallowed costs by the State electricity regulators.

Published on July 29, 2019
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