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‘Grossly inflated’: PowerMin on FY21 discom loss estimates of `90K crore

Icra said its estimate of net losses of Rs 56,000 crore for FY20 was based on continued high distribution losses for discoms and that tariff revisions had remained muted over the past three years.

By: ENS Economic Bureau | New Delhi |
August 19, 2021 3:15:37 am
Pwer minister, green energy, RK singh, US investors, Indian-US, renewable energy, information technology, IT, Indian express, Indian express newsPowe Minister RK Singh (File)

State-owned power distribution companies (discoms) posted losses of Rs 32,898 crore in FY19-20, the Power Ministry said in a statement on Wednesday in response to estimates that pegged the losses at Rs 60,000 crore for FY20 and about 90,000 crore for FY21. The Ministry said a loss estimate of Rs 90,000 crore for state discoms in FY21 was “grossly inflated”. The NITI Aayog had also used the estimate in its report on the power distribution sector published in August.

“… actual PAT figure for FY2020 is almost half of the negative ~Rs 60,000 crore projected by Icra for FY2020, thereby indicating that the Icra estimations of even FY2020 are significantly flawed. Icra has further built up the losses for FY2021 on their erroneously estimated figures of FY2020 by adding another Rs 30,000 crore due to Covid,” the Ministry said. It did not, however, provide any data on actual losses for discoms in FY21. The Ministry said Icra may have assumed that a Rs 30,000-crore increase in discom dues to creditors between March and December 2021 reflected additional losses for discoms noting that the increase was actually a result of cash flow problems.

“As a result of the above erroneous projections by Icra, the loss figures of Rs 90,000 crore for FY2021 seem to be grossly inflated,” the power ministry said.

Icra said its estimate of net losses of Rs 56,000 crore for FY20 was based on continued high distribution losses for discoms and that tariff revisions had remained muted over the past three years.

“We would able to reconcile our estimated loss figures for FY2020 with the loss estimates for FY2020 reported by the Ministry of Power only after detailed accounts prepared by PFC (Power Finance Corporation) are available. It would be especially important to look at the regulatory assets and grants booked by the discoms for FY2020,” Icra said in an official statement. Discoms can book regulatory assets for costs incurred in a particular fiscal allowing them to lower overall losses for a fiscal with a view to recovering those costs from consumers in the future.

The Ministry had noted that through the true-up mechanism, discoms would be able to recover losses due to change in consumption patterns due to the pandemic through tariffs in subsequent years and that Icra had also noted this in its report. “To the extent that such revenue losses claimed by discoms are approved by the SERCs (State Electricity Regulatory Commissions) under the true-up, the incremental revenue gap of discoms would be lower than the Rs 30,000 crore estimated by Icra,” the ratings agency said adding that any compensation by state governments by way of subsidies or grants could also result in lower booked losses for discoms.

The Cabinet, in June, announced a Rs 3.03 lakh crore incentive-based scheme to strengthen financial position of discoms. The government is aiming to cut commercial losses in the range of 12-15 per cent and reduce the difference between the average cost of supply and average revenue realised to zero by FY25.

Aiming to cut losses

The government is aiming to cut commercial losses in the range of 12-15 per cent and reduce the difference between the average cost of supply and average revenue realised to zero by FY25.

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