The aggregate loss of distribution companies (discoms) of the 15 states that have joined the Ujwal Discom Assurance Yojna (UDAY) so far will more than halve to 28 paise per unit by fiscal 2019 compared with 64 paise in fiscal 2016, according to a report by Crisil.
This would see aggregate losses of these discoms declining 46 per cent to about Rs 20,000 crore from about Rs 37,000 crore, the report added.
“The 15 states that have signed MoUs under UDAY envisage a reduction in the gap to reduce to nil in fiscal 2019 from 64 paise in 2016,” the report said. “However, Crisil believes the gap will reduce to 28 paise due to a lower-than-expected reduction in AT&C losses and tariff hikes.”
Under the UDAY scheme, state governments are to take over 75 per cent of their respective discoms’ debt, and would issue bonds to pay the debt back. The remaining 25 per cent would be financed by bonds issued by the discoms themselves, guaranteed by the state government.
The states that have agreed to join the scheme are Andhra Pradesh, Rajasthan, Jharkhand, Madhya Pradesh, Uttarakhand, Himachal Pradesh, Punjab, Jammu & Kashmir, Haryana, Gujarat, Chhattisgarh, Uttar Pradesh, Bihar, Odisha, and Maharashtra.
Total discom debt reached Rs 4.2 lakh crore as on March 31, 2015, compared with Rs.2.5 lakh crore as on March 31, 2013, with combined losses at about Rs 60,000 crore.
The 15 states that have signed the UDAY MoUs account for 65 per cent (about Rs.2.7 lakh crore) of the all-India discom debt and 65 per cent (Rs.38,000 crore) of the losses as on March 31, 2015.
There are two main reasons why the states will miss their target of reducing discom losses by 2019, according to Crisil.
“Increase in tariff will be lower in states with a weak policy ecosystem,” according to the the report. “Delays in tariff orders, already high levels of cross-subsidisation, and elections over the next two years will deter hikes in few states in comparison to what is envisaged in the MoUs.”
“States also vary with respect to their ability to reduce AT&C losses,” the report added. “Some states will face challenges in reducing AT&C losses given that they are yet to make meaningful investments in the separation of feeders, metering of feeders and distribution transformers, and also have a poor track record. Lack of skilled manpower can also thwart improvement in efficiencies.”
In this regard, some states perform better than others. However, the laggards account for a large component of discom losses and so need the most attention.
“Rajasthan, Haryana, Chhattisgarh, and Uttarakhand are expected to fare better in the implementation of UDAY, so are likely to be the biggest beneficiaries,” Gurpreet Chhatwal, Business Head - Large Corporates, CRISIL Ratings said. “However, UP, Bihar and Jammu & Kashmir are expected to be the laggards. These three states would account for almost two-thirds of the gap in fiscal 2019. So, concerted efforts by them will be critical to narrowing the future gap.”
View all SMART GRID Bulletins click here