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Business News/ Industry / Energy/  Discom losses plunged to ₹17,352 crore in FY18, says power minister

Discom losses plunged to ₹17,352 crore in FY18, says power minister

Power minister R. K. Singh said the growing electricity demand is an indicator of India's economic growth, and with the 10% rise in billed energy, the gap between the average cost of supply and average revenue realised is also narrowing

R. K. Singh, Union power minister. Photo: Ramesh Pathania / Mint.Premium
R. K. Singh, Union power minister. Photo: Ramesh Pathania / Mint.

New Delhi: State-owned electricity distribution companies (discoms) have witnessed a substantial drop in their losses, power minister Raj Kumar Singh said on Tuesday. Discom’s losses have narrowed to Rs17,352 crore in 2017-18 from Rs51,096 crore in FY16.

Before the introduction of the Ujwal Discom Assurance Yojana (UDAY) scheme, there were 211 divisions with losses of more than 40%, Singh said while highlighting the achievements of the four years of the National Democratic Alliance (NDA) government. This number came down to 194 in 2016-17 and 134 in the first nine months of the current financial year.

The Centre also said that Rs20,000 crore in interest costs was saved by discoms under UDAY, and the success of the scheme will be crucial for the long-term fortunes of the electricity sector, given that distribution firms are the weakest link in the electricity value chain. Poor payment record of discoms have adversely affected power generation companies and caused stress in the banking.

Singh said, growing demand for electricity is an indicator of India’s economic growth, and with the 10% rise in billed energy, the gap between the average cost of supply and average revenue realised is also narrowing.

India’s economy accelerated to 7.7% in the three months ended 31 March, the fastest in seven quarters, signalling a turnaround that could augur well for the election prospects of the Narendra Modi government.

The NDA government added 100 gigawatts (GW) of generation, with the energy deficit being reduced from 4.2% in 2013-14 to 0.7% in 2017-18. Singh also said that the KUSUM scheme, which promotes the use of solar power among farmers, will be implemented from next month.

All the proposed reforms, such as penalty on gratuitous load-shedding, not allowing losses of more than 15% as a pass through in tariff and limiting cross-subsidies, have in included in the draft national tariff policy. which will come into force from the next financial year, Singh added.

While analysts welcomed the moves, they were apprehensive about its implementation. “These amendments propose significant reforms in the electricity distribution business," rating agency Icra Ltd said.

Singh said that the AT&C losses have come down to 19%.

“The policy proposes suspension of licence in case of non-availability of adequate power supply arrangements and imposition of penalty in case of disruptions in supply to consumers, except due to force majeure condition or technical faults," the statement added.

Singh also spoke about the State Bank of India-led plan to address the issue of stressed assets in the power sector that is termed Scheme of Asset Management and Debt Change Structure, or Samadhan. He also explained a new plan proposed by state-run Rural Electrification Corporation (REC), which is under consideration.

Under the Samadhan scheme, the debt burden is reduced to a manageable level by bank debt being converted into equity, thereby readying the projects to be bid out.

About REC’s scheme, Singh said, “The attempt is to make sure that the assets which can be salvaged are salvaged. The attempt is to make sure that assets are not sold for a song."

A total of 34 coal-fuelled power projects, with an estimated debt of 1.77 trillion, have been reviewed by the government after being identified by the department of financial services. Issues faced by these projects include paucity of funds, lack of power purchase agreements and absence of fuel security.

Singh added that the government didn’t want assets that are complete and constructed at a cost of 5 crore per MW to be sold off at 1 crore per MW or 2 crore per MW because the people who will buy it at such throwaway prices will make a killing.

Non-performing assets (NPAs) in power generation accounted for around 5.9% of the banking sector’s total outstanding advances of 4.73 trillion, according to the second volume of the Economic Survey 2016-17 released in August.

“The ‘warehousing’ scheme proposed by REC is to ensure that the stressed projects are adequately taken care of and get healthy once the demand for the electricity kicks driven by the upward economic trajectory. It may also involves setting up a special purpose vehicle," said a government official aware of the scheme requesting anonymity.

Singh, who is also the minister for new and renewable energy said that around $42 billion investment was made in renewable energy in India over the last four years. Also, solar energy capacity increased by over eight times from 2.63GW in 2014 to 22GW. Wind energy capacity also increased by 1.6 times from 21GW in 2014 to 34GW.

“Thank God for renewables," Singh said.

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Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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Updated: 05 Jun 2018, 10:49 PM IST
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