Centre to review discoms’ turnaround efforts

States which fail to turn around their power discoms, despite debt restructuring under UDAY, will have to show the companies’ losses as state debt in their budgets from 2018-19


Experts said the gap between the power supply cost and revenue realisation by distribution companies has widened from 18% to 25% in recent years. Photo: Mint
Experts said the gap between the power supply cost and revenue realisation by distribution companies has widened from 18% to 25% in recent years. Photo: Mint

New Delhi: Last November, the central government floated an ambitious scheme to rescue debt-ridden power utilities in states. In a few days, we will know how well it has worked.

The government is set to review how power distribution companies bailed out through a debt restructuring in 2015-16 have cut power theft and improved bill collection efficiency, once the first set of data on their operational performance arrive by 30 June.

Monitoring performance is crucial: states which fail to turn around their power utilities despite the debt restructuring under the Ujwal Discom Assurance Yojana (UDAY) will have to show the firms’ losses as state debt in their budgets from 2018-19.

A power ministry official, who asked not to be identified, said distribution firms in Rajasthan and Uttar Pradesh have taken strict measures to improve performance. Cutting the salaries of engineers for failing to contain power theft and incentivizing reduction in power theft by providing uninterrupted power supply in areas where theft is reported to be low are among the steps taken, said the official.

Losses from power theft and inefficiency in bill collection, known as technical and commercial losses, are reported every quarter. In some states, such losses are as high as 35% of the total units supplied.

The first set of data after eight states took over half of the outstanding debt of distribution companies by 31 March 2016 is expected by the end of this month.

The official quoted earlier said the data, as reported by states, will be made available to the public through a mobile phone application.

On 5 November 2015, the Union cabinet approved UDAY, allowing states to take over half of the outstanding debt of utilities in 2015-16. Since then, states have raised about Rs.1 trillion through UDAY bonds till 31 March 2016.

Andhra Pradesh became the 13th state to join the scheme on Friday after the Union cabinet extended the deadline for joining the scheme till the end of the current fiscal.

States that have joined the scheme so far account for Rs.2.2 trillion of utility debt out of the total outstanding debt of all power utilities in the country of Rs.4.3 trillion as of 30 September 2015.

Private distribution companies in states like Delhi, which are also under the burden of debt and costs that tariff regulators have not allowed them to pass on to consumers, are keen to join the scheme if the central and state governments allow it.

Experts said the gap between the power supply cost and revenue realization by distribution companies has widened from 18% to 25% in recent years. These firms’ revival will hinge on minimizing this gap.

“Debt takeover improves the financial position of the distribution companies. They must use this opportunity to work on improving operational performance. The reported operational loss of 25% is understated due to ineffective reporting, and state distribution companies need to invest either in internal reforms or seek private participation,” said Kameswara Rao, leader of energy utilities and mining at PricewaterhouseCoopers in India.

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