Andhra Pradesh power sector under tremendous financial distress

VIJAYAWADA: The power sector in the State seems to be under tremendous financial distress, as evident from the fact that it has a revenue gap as high as 24.18 per cent, which in monetary terms is Rs 10,345 crore for the financial year 2020-21. 

According to sources, the average cost of supplying power to a consumer in the state is Rs 6.92 per KWh and the project revenue of the power utilities on a per unit of electricity basis after taking into consideration all the revenue resources including tariff income, cross-subsidy surcharge, REC income etc., is only Rs 5.25. The gap between the expenditure and the income is to the tune of Rs 1.67 per KWh and this translates to a gap of Rs 10,345 crore.

Revenues besides income from tariffs depend on various other factors and might not truly reflect the proceeds from regular energy business.  Tariff income for the previous fiscal was Rs 30,148.29 crore and this translates to Rs 4.88 per KWh. The real gap between the cost associated with supplying power and revenues realised from the same is Rs 2.04 per KWh, translating to a gap of Rs 12,630 crore. Reorganised AP remained a predominantly agrarian state and the energy sector has forgone a sizable revenue from the subsidized sector when compared to the revenue realised from the same. Those in the know of happenings in the energy sector say that in the first five years after state bifurcation, the power sector witnessed irrational policies, which has resulted in today’s situation. 

In the first year of the previous government, the regulatory commission provided for a revenue gap of only Rs 1,909 crore, which was 7.78 percent of the total cost of supply. It increased to Rs 10,345 crore in the previous fiscal. The factors that adversely affected the power sector are arrangement to procure expensive power, humongous increase in burden of liabilities on the sector, unwarranted capital expenditure and inefficient policies with respect to other elements’ costs. Besides, there has been a massive accumulation of unpaid liabilities of the government and companies. 

Power play

• Rs 10,345 crore Revenue gap for 2020-21  (Rs 1.67 per KWh)
• Rs 6.92 per KWh Average cost of supplying power to a consumer 
• Rs 5.25 Revenue for power utilities per unit