Home / Industry / Energy /  Discom losses fell to 38K cr in FY20, says power minister

New Delhi: The losses of state-owned electricity distribution companies (discoms) have dropped by more than a third to 38,000 crore in FY20 from 61,360 crore in FY19, Union power and new and renewable minister Raj Kumar Singh said on Friday.

The gap between the cost of electricity bought (ACS, or average cost of supply) and supplied (ARR, or average realizable revenue) has also come down, Singh, who is spearheading the government’s efforts to ensure 24X7 power for all and the green energy push, said while launching the Ninth Annual Integrated Rating for State Power Distribution Utilities.

In a related development, five state distribution utilities of Gujarat and Haryana have topped the latest power ministry ratings for parameters such as operational, financial, regulatory, and reform measures among 41 discoms across 22 states.

The annual integrated rating exercise for state power discoms is aimed at helping banks and financial institutions assess risk while lending to the distribution utilities. The rankings will impact their borrowing from the state-owned financial institutions, including the Power Finance Corporation (PFC) and the Rural Electrification Corp. Ltd (REC), the largest lenders to the Indian power sector whose prudential norms have been tightened by the government. The higher the ranking a discom has, the better will be the terms at which it will be able to access finance. This in turn will help instil financial discipline at discoms.

State-run PFC has been given the mandate for the rating exercise, while ICRA and CARE are the designated credit rating agencies for it.

“He (Singh) said that the Indian power sector will benefit from a fair and accurate assessment of the true position of the distribution sector, which in turn will help assess and improve its performance. This will also assist state governments, lending institutions and other stakeholders to take important decisions," the Union power ministry said.

The top A+ grade has been given to five discoms, including the Uttar Gujarat Vij Company Ltd, Madhya Gujarat Vij Company Ltd, Dakshin Gujarat Vij Company Ltd, Paschim Gujarat Vij Company Ltd, and Dakshin Haryana Bijli Vitran Nigam Ltd. The worst performing discoms with a C rating are Eastern Power Distribution Company of AP Ltd, Jaipur Vidyut Vitran Nigam Ltd, Meghalaya Power Distribution Corporation Ltd, Jharkhand Bijli Vitran Nigam Ltd, Manipur State Power Distribution Company Ltd, Tripura State Electricity Corporation Ltd, Tamil Nadu Generation and Distribution Corporation, and Jodhpur Vidyut Vitran Nigam Ltd.

“The operational and reform parameters such as aggregate technical and commercial losses, efficiency of power purchase cost, and corporate governance carry a weightage of 43%. The financial parameters such as cost coverage ratio, payables, receivables, and timely submission of audited accounts, carry a weightage of 42%. External parameters such as those relating to the regulatory environment and state government subsidy support have been assigned a weightage of 15%," the report said.

The cabinet committee on economic affairs had last month approved the marquee 3.03 trillion power discom reform scheme, under which the Centre’s share will be 97,631 crore. The funds will be released to discoms subject to them meeting reform-related milestones.

The discoms that have low ranks cannot access the funds through this scheme unless they formalize plans to bring down their losses, get their respective state government’s approval, and share the plans with the Union government, Singh said.

“Where the distribution companies are in losses, the states will be able to draw funds under the scheme only if they institute measures to reduce these losses. Thus, the funding is reforms linked," the power ministry said.

These rankings have come even as the Union cabinet may shortly consider the Electricity (Amendment) Bill, 2021, that aims to de-license power supply, allowing multiple distributors in the same area, and giving consumers the option to switch power suppliers as reported by Mint on Friday.

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