NEW DELHI : Power and new and renewable energy minister Raj Kumar Singh on Tuesday said state electricity distribution companies (discoms) remain a challenge even as the National Democratic Alliance (NDA) government is working on a new scheme to further reduce losses.

This comes at a time of a crisis in electricity discoms because of their poor financial health, which has resulted in delayed payment to generation utilities. The discoms owe Rs76,336 crore for the power bought from the generation companies (gencos) at the end of July, according to information available on the union power ministry’s PRAAPTI portal. This comprised Rs56,710 crore as the overdue amount.

Mint reported on 16 August that the union government was exploring a radical plan to help bring financial discipline to state discoms by limiting state governments’ borrowing. According to the broad contours of the plan, the finance ministry may withhold permission to the state to borrow to the extent of electricity losses not funded by the respective state governments.

“Off and on, in some states, in some discoms, there is stress," Singh said at the India Energy Forum by CERAWEEK and added that in the “next programme losses will come down further".

Combined with a plan to limit discoms loans of Power Finance Corp. Ltd (PFC) and REC Ltd to capital expenditure projects, the idea is to prompt state government departments such as police and other essential services to make timely payments to discoms.

Discoms are the weakest link in the electricity value chain, plagued by low collection, increase in power purchase cost, inadequate tariff hikes and subsidy disbursement, and mounting dues from government departments. This has resulted in discoms having poor payment records.

Raj Kumar Singh had also discussed payment security at a two-day conference of state power ministers last week.

India has added 125,000 MW of power generation capacity and 112,000 circuit km of high tension lines over the last five years. Singh said this has enabled the national grid to transfer 99,000 MW of electricity from any corner of the country. In addition, Rs70,000 crore has been invested in strengthening the electricity distribution system.

“The power situation has undergone a sea change," Singh said.

In an attempt to ensure timely payments by states to electricity generation utilities, the government has already made it mandatory for state discoms to offer letters of credit as part of the payment security mechanisms in power purchase agreements. Also, the NDA government wants state power regulators to ensure regular tariff revision and put an end to creating so-called regulatory assets, as it seeks to enforce financial discipline at state electricity discoms.

“We are tightening procedures," Singh said.

Singh also expressed confidence about India meeting the target of 450 GW of renewable energy by 2030 and said while 83,000 MW of clean energy capacity has already been set up, 29,000 MW is under construction.

To address the issue of land availability for clean energy projects, India also plans to set up solar and wind projects on fallow land along its international border with Pakistan.

“Also 30 GW is under bids," Singh said and added, “We will meet 450 GW target. I don’t have any doubt. The time frame is 2030."

This comes in the backdrop of India’s clean energy sector going through a crisis. With record low solar and wind power tariffs, banks are wary of lending to developers as they suspect the viability of projects that have agreed to sell power at rock-bottom tariffs. There are other problems such as delay in payment by state-run power distribution companies that range from two months to 15 months and non-allocation of land-to-wind power projects, as well as transmission- and connectivity-related challenges.

According to the government, the electricity demand in the country grew 6.9% in the last quarter. India has brought 26.4 million new electricity consumers to its fold, which according to Paris-based International Energy Agency (IEA), is the largest expansion of electricity access in mankind’s history.

Singh said with the new connections, electricity demand has started rising as rural households start buying air conditioners and refrigerators.


Close