At Rs 1.23 trillion, dues to power producers up 17%; six states account for 70%

Despite efforts by the Center to induce payment discipline in the power sector, state-run electricity distribution companies’ (discoms) unpaid dues to power producers continue to rise. While the dues stood at Rs 1.23 trillion as on Sunday, up 17% year-on-year, Tamil Nadu, Maharashtra, Rajasthan, Uttar Pradesh, Andhra Pradesh and Telangana together accounted for 70% of the amount.

According to the Union power ministry’s PRAAPTI portal, launched to bring in transparency in power purchase transactions between generators and discoms, Tamil Nadu discoms have the highest outstanding dues of Rs 22,756 crore to gencos, closely followed by Maharashtra at Rs 21,163 crore. Rajasthan (Rs 12,163 crore), Uttar Pradesh (Rs 11,825 crore), Andhra Pradesh (Rs 10,229 crore) and Telangana (Rs 8,239 crore) also have large dues to gencos.

Of the total outstanding dues, almost Rs 1.05 trillion (85%) are ‘overdues’, with payment default of 45 days or more, as against Rs 84,376 crore a year ago.

Speaking to FE, Union power secretary Alok Kumar said the main reason why these six states accounted for the bulk of the dues to gencos is because state governments often fail to pay subsidies to discoms on time. Also, government departments do not clear their electricity bills promptly.

Kumar said the Center is working on a system in which if a discom does not pay gencos, it will not get power. “They (the discoms) have to be responsible and pay the power dues because if one generator goes sick, all its other clients are affected too. We will not allow financial indiscipline and sickness to spread all across the sector because of the indiscipline of a few. Our approach would be to enforce financial discipline across the system and contain and localize the sickness, wherever it appears, ”he said.

While central power sector undertakings like NTPC have started regulating power in case of non-payment, most independent power producers continue to be reluctant to enforce the rule.

The Center has, over the years, implemented a series of schemes and bailout packages for the reconstruction and revival of the power sector, including FRP (financial restructuring plan), UDAY (Ujwal Discom Assurance Yojana) and the Rs 1.35-trillion Atmanirbhar liquidity infusion scheme. Though some progress was reported on parameters such as AT&C losses and ‘revenue gap’ during UDAY implementation, the gains have not been consolidated since.

“The sole intent of the Center’s schemes is to give cash-strapped state discoms a breather to improve infrastructure to bring down the losses to manageable levels and introduce cost-effective tariffs. But the problem is that the power sector is so deeply embedded in politics and with elections taking place every two-three years, it is very difficult to get a three-four years’ window to undertake the reform process, ”said Ashok Khurana, director general of Association of Power Producers.

“As most agricultural connections are not metered, there is bound to be over-reporting of agricultural power. The deficits are again bound to increase until and unless there is a strong political will to deepen the reforms process. The states have to decide on a roadmap and stick to it. Gujarat and Haryana have done well, ”he said.

Sector experts have said the issue needs to be addressed fundamentally by states, especially those which are defaulting on a regular basis vis a vis the others.

Manish Kumar, senior director at Crisil Ratings, said, “Structural issues have to be addressed before we see any improvement in the power sector. States need to bite the bullet over operational issues such as timely tariff hikes, reducing AT&C losses and reducing the ACS-ARR gap. The Center is doing its bit by introducing the amendment to the Electricity Act, but it is the states which need to undertake structural reforms and reduce losses for discoms. ”

Girishkumar Kadam, senior vice president and co-group head – Corporate Ratings, Icra, concurred. Discoms’ financial health continues to remain weak with inadequate tariffs and high distribution loss levels and cost overheads. More importantly, average tariff hike allowed for discoms by the state power regulators last fiscal remained marginal at about 1%, while there has been an upward pressure on cost of power supply. ” According to him, cost-reflective retail tariffs along with implementation of the fuel cost adjustment framework are imperative for the revival of discoms.

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