NEW DELHI: In a heartening sign that India’s economy is beginning to shake off the impact of the pandemic, power consumption broke all-time records twice this past week. On Friday morning, peak power demand hit a record high of 187.3 gigawatts (GW). But while rising demand is an indicator of wider economic recovery, the power sector itself may not immediately benefit. The problem, as almost always, is discom indebtedness.
The Centre had kicked off a massive Rs 1.2 lakh crore liquidity assistance program for power distribution firms after the Covid-19 outbreak last year, and by September 2020, Rs 1.18 lakh crore in loans had been sanctioned. But the amount of money discoms owe power generators has continued to rise. Discoms’ pending dues to gencos stood at Rs 1.3 lakh crore as of the end of November 2020, compared to Rs 97,875 crore at the end of March 2020.
Discom executives note that since the factors driving debt accumulation are fundamental, a rise in demand would likely be accompanied by more pending dues. Among the key issues is a high level of distribution losses, a classification which includes unpaid bills, and delayed state subsidy payments.
“Both subsidy payments and bill collections have been stressed by the pandemic,” said a senior state discom executive, noting that since government revenues have dived post-Covid, subsidy payments are likely to remain a problem. As for bill collections, industry sources say they have improved, but not as fast as demand has.
According to ICRA Ratings, while the profitable commercial and industrial demand is seen improving in FY22, discom losses are likely to remain at over Rs 75,000 crore due to inadequate tariff hikes, high distribution losses, and additional interest costs incurred on loans extended under the Centre’s relief scheme.