Discoms’ dilemma: UDAY fades as Saubhagya shines

While the UDAY scheme for revival of electricity discoms has been dawdling since its November 2015 launch, the Narendra Modi government’s ambitious household electrification scheme Saubhagya seems to have put a new speed-breaker on its path.

At the end of September 30, the aggregate technical and commercial (AT&C) losses — the jargon for electricity units for which revenue is not realised on account of theft and pilferage — suffered by
the discoms in 27 UDAY states/UTs stood at 21.9%, just 80 basis points lower than a year ago.

Clearly, the target of reducing AT&C losses to 15% by the end of the current financial year is set to be missed. As at the end of the first half of this fiscal, these losses, one of the principal reasons for the discoms being perennially in the red, were the highest in Bihar (38.9%), followed by Jharkhand (36.9%), Uttar Pradesh (33.1%). AT&C loss of one percentage point translates to financial under-recovery of about Rs 4,000 crore on a pan-India basis.
The other important UDAY target of eliminating the gap between the average cost of supply and the revenue realised (ACS-ARR gap) is also proving to be beyond reach. The ACS-ARR gap of UDAY discoms stood at a considerable Rs 0.27/unit (KwH) at the end of H1FY19, with the gaps being as high as Rs 1.85/unit in Jharkhand, 77 paise (Punjab) and 52 paise (Haryana). The average thermal power tariff in the country is Rs 3.53/unit.

As reported by FE earlier, financial losses of UDAY discoms fell to Rs 17,352 crore at the end of FY18 from Rs 34,656 crore a year ago. However, these figures need to be discounted because their outstanding dues to power generators surged 150% to Rs 32,071 crore in the same period.

“The government’s focus on household electrification (under Saubhagya more than 2 crore households have received electricity connections) and the increase in hours of power supply are impacting AT&C loss reduction. The billing and collection efficiency need to improve further,” Vivek Sharma, senior director at Crisil infrastructure advisory said. Another expert who refused to be identified said that many newly connected houses have not received their first bills yet. “Poor billing efficiency is a result of the involvement of multiple agencies not working in sync with one another. The lack of IT and billing infrastructure is also hitting collections,” the person added.

Power minister RK Singh has proposed in the new tariff policy under which AT&C losses above 15% won’t be compensated through tariffs after FY19.

Helped by the UDAY scheme, discoms in four states —Maharashtra, Rajasthan, Haryana and Andhra Pradesh — had swung to profit in FY18, through checks on power purchase costs, improved billing and collection efficiencies and reduced interest costs.

To be sure, AT&C losses traditionally are higher in the April-September period due seasonal variations of demand and changes in tariff collection patterns. Most of the subsidies for agricultural consumers are received in the later part of the fiscals by the discoms, which would reduce these losses as well the ACS-ARR gaps.
State government departments’ often delay their electricity bill payment to the electricity boards. Such dues, receivable by discoms, had accumulated Rs 39,442 crore as on December 2017.[Source-Financial Express ]