Discoms miss key UDAY targets as power purchase costs jump

Losses by the power retailers, known as discoms, under the Ujjwal Discom Assurance Yojna (UDAY) continued to rise, with states like Uttar Pradesh, Bihar, Jharkhand, Rajasthan, Madhya Pradesh, Jammu & Kashmir and Chhattisgarh lagging far behind the actual targets.

According to the provisional data furnished by 26 states/UTs, operational efficiency of distribution companies across India stood at 19.05 percent at the end of fiscal 2019, while the target was to bring down these losses to 15 percent by FY19-end.

The aggregate technical and commercial (AT&C) losses — electricity units lost on account of pilferage — are linked to operational efficiency.

The AT&C losses for Uttar Pradesh were at 24.64 percent against the target of 19.37 percent, Jharkhand’s AT&C losses were at 34.59 percent vs the target of 15 percent, Bihar’s power supply losses came in at 36.34 percent against 21.16 percent target for FY19.

Also, discoms were losing 25 paise on every unit of electricity sold (ACS-ARR gap) at FY19-end, meaning they failed to meet another UDAY target which was to eliminate the gap by that date.

Another area of worry was the outstanding dues of Rs 25,475 crore against 17 power generating companies at the end of FY19. Discoms owe Rs 9,771.91 crore alone to NTPC and about Rs 3,448.66 crore to Adani Power.

In a review meeting held by the Ministry of Power in February with the state officials, the states under the UDAY scheme had expressed inability to meet the targets as the power purchase costs increased manifold.

The increase in power purchase cost, as cited by the states, was due to the shortage of coal, rise in railway freight charges, an increase in employee cost on account of 7th pay commission implementation and also reduction in bill collection from rural areas where electricity supply has increased but the government is of the view that the states' continue to make losses due to inadequate tariff revision by state electricity regulatory commissions.

An internal note of the ministry of power seen by CNBC-TV18 shows that the power ministry agrees that power purchase costs for discoms have increased 5% in the first 9 months of FY19. Sources add that "the government is keenly looking at further bringing in structural changes in the power purchase transactions so that the cost of power can be contained at an acceptable level. Sources further add that UDAY Memorandum of Understandings (MoUs) have a predefined trajectory of the turnaround of discoms ranging from 3 years to 5 years."

As cash gap is a threat to a continuous and reliable supply of power, clearance of tariff policy to hold states discoms accountable for power supply losses and quality power supply will be high on the agenda in the first 100 days of the new government in the coming days.