Discoms in 26 states would face a loss of approximately Rs 16,000 crore once the latest regulations are implemented.
The power ministry’s latest regulatory announcement may significantly hurt earnings of distribution companies (discoms) as they are unlikely to receive any compensation for aggregate technical and commercial (AT&C) losses above 15 percent in tariffs.
According to a Financial Express report, close to 26 states have AT&C losses at 19 percent as of end-FY18.
The losses is estimated to cost close to Rs 4,000 crore per percent. This means that discoms in these 26 states would face a loss of approximately Rs 16,000 crore once the regulations are implemented.
Bihar’s AT&C losses at present is estimated at 33.2 percent, Madhya Pradesh at 29.7 percent and Uttar Pradesh at 27.7 percent. The regulation is likely to be implemented in FY20.
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According to the report, the target of 100 percent electrification of households under the Saubhagya scheme will put further pressure on discoms. The report estimated that an additional 3.6 crore households would be required to be added to the grid.
Estimating a household’s average load of 1 kilowatt for eight hours a day, it would mean that an additional 80,000 million units (MU) of electricity per annum would be required. With the cost of supply and revenue earned being Rs 0.22 per unit, it could mean the under-recovery of close to Rs 1,800 crore every year.
The power ministry is also looking to cap cross subsidies to 20 percent. These are the tariffs paid by industrial and commercial consumers to subside household and farmers' electricity consumption. This, and the proposed penalties of load shedding move may further dampen earnings for discoms.
A slew of measures under the UDAY scheme led to discoms cutting their losses by half in FY18 to Rs 17,352 crore. Discoms in the states of Maharashtra, Haryana, Andhra Pradesh and Rajasthan turned profitable in FY18.