State distribution utilities stop payments despite NTPC discounts

State distribution utilities stop payments despite NTPC discounts

New Delhi: In an indication of the worsening financial health of state electricity boards (SEBs), the distribution utilities of eight states have stopped making immediate payments to NTPC Ltd, India’s largest power producer, despite being offered discounts.

NTPC has to offer its customers a 2% rebate when an immediate payment is made upon presenting the bill, and a discount of 1% if the payment is made within a month of the bill submission, according to the stipulations of the Central Electricity Regulatory Commission, the country’s apex power sector regulator. In addition, NTPC also offers graded discounts if the payment is made within the time period of 30 days to encourage timely payment by the power procurers.

“We are not availing discounts. SEBs are running in losses. Earlier, the Bihar state government was giving 90 crore to bridge the resource gap to the SEB; now it has gone up to 120 crore," said Sushil Kumar Modi, Bihar’s deputy chief minister, who also heads the empowered committee of state finance ministers.

“States which were earlier availing discounts have stopped doing so and are making payments at the end of 60 days," said a senior NTPC executive, requesting anonymity. An NTPC spokesperson attributed it to the “poor financial health" of the power procurers.

NTPC doesn’t offer any discount if a payment is made after 30 days, and in the event of non-payment after 60 days, it can “regulate", or stop, power supply.

India has an annual electricity requirement of 700 billion units, of which around 220 billion units are supplied by NTPC. The average monthly payment made by power procurers to NTPC is around 5,000 crore.

This development comes at a time when some distribution companies have defaulted on payments to NTPC. A case in point being Reliance Group’s BSES Rajdhani Power Ltd and BSES Yamuna Power Ltd that still owe money to NTPC.

SEBs across India are saddled with losses because of power theft and technical losses during transmission and distribution, billing inefficiencies, and, more importantly, because they have to buy expensive power to tide over short-term deficits. Some SEBs have also failed to revise tariffs for many years, adding to losses.

The political compulsion of providing free power to farmers has also taken a heavy toll on the SEBs. As agricultural power supply is unmetered, many utilities write off all their losses from transmission and distribution as farm consumption. In addition, tariff revisions are inadequate as the average annual rate of increase of charges for consumers is less than the rate of increase in power purchase costs.

The poor financial health is also on account of non-payment of subsidy amounts by state governments.

The cumulative loss of all the distribution utilities in India is around 75,000 crore, and if the present trend continues, the projected loss in 2014-15 will be 1.16 trillion, according to a study conducted by energy consulting firm Mercados EMI Asia for the 13th Finance Commission.

India has 73 distribution utilities, which include private distribution companies. Of the 40 state utilities that have been unbundled from their SEBs, only 11 utilities are profitable, with the rest making losses after calculating the subsidy provided by the government, according to a report prepared by Power Finance Corp. Ltd for 2008-09. Also, only 18 of these utilities have a positive net worth, with the remaining 22 having a negative net worth, the report said.

NTPC is looking to increase installed capacity to 75,000 megawatts (MW) by 2017 and 128,000 MW by 2032 from 34,854 MW now. The utility posted a profit of 6,011 crore on revenue of 43,337 crore in the year ended 31 March.