HYDERABAD: Even after the Central government implemented the Ujwal Discom Assurance Yojana (UDAY) for the revival of Discoms, the fate of the State owned power distribution companies (discoms) has barely changed.
In fact, there is a significant downside risk (leading to higher States' liabilities) with no visible signs of turnaround. The revenue gaps of the two discoms of Telangana increased significantly, even after the implementation of the UDAY scheme, the Reserve Bank of India's (RBI) latest report on State Finances stated this.
The RBI report said that only five States - Assam, Goa, Gujarat, Haryana, and Maharashtra - have eliminated the revenue gaps in 2019-20, thus meeting the UDAY target. Jammu and Kashmir, Rajasthan, Andhra Pradesh, and Telangana have the highest revenue gaps, which have widened further in 2019-20. The States' outstanding liabilities increased by 1.5 per cent of GDP due to UDAY in 2015-16 and 2016-17.
However, despite this steep fiscal cost, discom losses since then have reached a pre-UDAY level of 0.3 per cent of GDP in 2018-19. In fact, adjusted for revenue grants made under UDAY - which are transitory and in the nature of accounting transfers - discom losses are significantly higher in 2018- 19 vis-a-vis 2015-16.
Estimates of the revenue gap per unit of power sold - average cost of supply minus average realisable revenues (ACS-ARR gap) for 2019-20 reveal that most States have seen a further worsening in their financial performance.
The financial position of discoms is expected to weaken further in 2020-21 as the lockdown has severely impacted the power demand, particularly in the industrial and commercial segments, while their cost structure is rigid due to minimum commitmentsfor power off take in long-term Power Purchase Agreements (PPAs).
While the Centre has announced a liquidity support of Rs 90,000 crore for discoms which may help them tide over immediate liquidity concerns, another round of bailouts of loss-making discoms seems imminent in the aftermath of the crisis.
According to the RBI report, the revenue gaps of the two discoms of Telangana increased significantly, even after the implementation of the UDAY scheme, the Reserve Bank of India’s latest report on State Finances stated this