12,123.1516.25
Stock Analysis, IPO, Mutual Funds, Bonds & More

Discoms suffering severe financial stress: Ind-Ra

Only four discoms – Dakshin Gujarat, Madhya Gujarat and Uttar Gujarat and Bengaluru Electricity Supply Company Ltd have outperformed their UDAY’s AT&C loss target in FY18.

, ET Bureau|
Dec 11, 2019, 08.46 PM IST
0Comments
Getty Images
Power-Line-getty-1200
Some 20 discoms were able to reduce the gap from FY17 levels
Kolkata: A study by India Ratings & Research on the financial health of 29 power distribution companies indicate that even though book losses of discoms have declined on an overall basis in FY18 compared with FY17, the sector has been suffering from severe financial stress.

“Financial profiles of discoms have been adversely impacted due to lower-than-expected decline in AT&C losses and widening of ACS-ARR gap, as the increase in power purchase costs on one end of the spectrum have not been consistently matched by the cost reflective tariff hikes on the other end,” the study mentioned.

Inadequate or even nil tariff hikes by many discoms have led to revenue under-recoveries, resulting in a huge pile-up of regulatory assets. In Ind-Ra’s analysis of 29 discoms, only 14 hiked tariff in FY20 and only 13 in FY19.

Moreover, there is limited upside available for discoms for revenue growth as subsidising consumers (commercial and industrial categories) are already burdened with exorbitantly high tariffs. With alternatives such as power exchange (markets) and cheaper power from captive renewable generation available, discoms are in imminent danger of losing such consumers who essentially subsidise domestic and agricultural category consumers, thereby affecting their long-term financial sustainability.

Only four discoms – Dakshin Gujarat, Madhya Gujarat and Uttar Gujarat and Bengaluru Electricity Supply Company Ltd have outperformed their UDAY’s AT&C loss target in FY18. Furthermore, in FY18, the actual AT&C losses of six discoms – Eastern Power Distribution Company of Andhra Pradesh, discoms of Telangana, North Eastern Electricity Supply Company of Odisha, Dakshin Vidyut Vitran Nigam Limited of Uttar Pradesh and Uttrakhand Power Corporation Limited – were higher than that of FY17.

Discoms’ performance with respect to ACS-ARR gap reduction has seen a marginal improvement. In FY18, the discoms of Gujarat, Haryana, Uttarakhand, Maharashtra State Electricity Distribution Company Ltd, Bengaluru Electricity Supply Company Ltd and Mangaluru Electricity Supply Company Ltd were able to earn more than they spent per unit sold.

Some 20 discoms were able to reduce the gap from FY17 levels, the gap for nine discoms of Rajasthan, Bihar, West Bengal, Dakshinanchal Vidyut Vitran Nigam Limited of Uttar Pradesh, Hubli Electricity Supply Company of Karnataka and North Eastern Electricity Supply Company of Odisha further widened from FY17 levels. Clearly, the under-achievement by several discoms in AT&C losses and ACS-ARR gap from targeted level is a cause of concern and requires urgent reconsideration of strategy.

Also Read

Discom fails to meet target, opposes solar rooftop

ICRA expects Budget to focus on power discoms, RE and gas plants revival

Electricity Act may be amended to ensure discoms honour power pacts

Govt's proposed discom scheme positive measure for the power sector

Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service