Tatsat Chronicle Magazine

DISCOMs Losses Come Down As Reforms In The Distribution Start Showing Results

December 5, 2022

Preliminary analysis of data for carried out by the Ministry of Power for the FY2022 of 56 DISCOMs contributing to more than 96% of input energy, has brought out that Aggregate Technical and Commercial Loss (AT&C Loss) and Average Cost of Supply and Average Realizable Revenue ACS-ARR Gap has come down.

The analysis indicates that the AT&C losses of DISCOMs have declined significantly by five per cent to 17% in FY2022 from 22% in FY2021. Similarly, the ACS-ARR Gap (on subsidy received basis, excluding Regulatory Income & UDAY Grant) has declined by 47 paise from Rs. 0.69/kWh in FY2021 to Rs. 0.22/kWh in FY2022. AT&C Loss and ACS-ARR Gap are key indicators of DISCOM performance. In the last 2 years, the AT&C loss of the DISCOMs of the country was hovering at 21-22% which resulted in Ministry of Power instituting a number of measures to improve the performance of utilities.

Reduction in AT&C losses improves the finances of the utilities, which will enable them to better maintain the system and buy power as per requirements; benefitting the consumers.  In September 2021, the Ministry of Power had revised the prudential norms of PFC and REC, the lending agencies for the power sector to provide that loss making DISCOMs will not be able to avail financing from PFC and REC until and unless they draw up an action plan for reducing the losses within a specific timeframe and get their State Government’s commitment to it.

The Ministry of Power also decided that any future assistance under any scheme for strengthening of the distribution system by the DISCOMs will be available to a DISCOM which is making losses only if it undertakes to bring its AT&C losses / ACS-ARR Gap down to specified levels within a specific timeframe and gets their State Government’s commitment to it.

The Revamped Distribution Sector scheme lays down that funding under the scheme will be available only if the DISCOM commits to an agreed loss reduction trajectory. Officials said that Ministry of Power made a series of presentations before the 15th Finance Commission as a result of which the commission provided for an additional borrowing window to States contingent on their taking steps to reduce to their DISCOMs losses.

The Ministry of Power issued regulations in October 2021 providing for mandatory energy accounting and energy auditing for all DISCOMs. Similarly in June this year, the ministry issued Late Payment Surcharge Rules which provide that unless the distribution companies promptly pay for the power drawn from the ISTS, their access to the power exchange will be cut off.  While putting all these in place; the ministry also worked with the distribution companies to provide the necessary finances under the RDSS for undertaking the loss reduction measures.

The efforts of the ministry, state governments and the distribution companies to implement the reforms and adoption of best practices have helped bring down the losses. As a result – the viability of the power system has improved.

This was necessary because the demand for power has been growing and further investments will be necessary for the power sector to expand to meet the growing demand; and the investments will only come if the power sector remains viable.

Girja Shankar Kaura

The writer is a Delhi-based freelance journalist, who has reported and written on a wide range of subjects in an extensive career.