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New UserUDAY scheme: Power companies still losing 20 paise on every rupee spent on transmission
24 Aug 2016
UDAY, a government scheme aimed at rescuing power distribution companies
from their financial mess, may not be an immediate success because the utilities continue to
lose at least 20 paise on every rupee spent to send electricity to consumers.
However, there has been an improvement, with the average loss on every rupee spent
narrowing from 25 paise last year. The loss is on account of increases in expenses and
costs, which are not reflected in tariffs, according to a study by rating companies.
"If cost components are not reflected in tariffs, utilities cannot recover what they spend for
consumers and losses will remain," said Sabyasachi Majumdar, senior vice president at
ICRA Ratings.
"No matter how many revival schemes are announced, buildup of losses and debt levels will
not stop unless these utilities recover what they spend on sending power to consumers'
premises."
The Union Cabinet approved the Ujwal DISCOM Assurance Yojna, or UDAY, in November to
facilitate the financial turnaround and revival of power distribution companies. The scheme seeks to achieve its goals by improving
operational efficiencies of the utilities, reducing the cost of power, lowering interest costs and enforcing financial discipline on DISCOMs
through alignment with state finances.
"In the past, the government helped power distribution companies to write off these losses but they keep on accumulating again because
recovery remains less than 100 per cent," said a senior analyst.
The government said in November that the weakest link in the value chain is
distribution. It said distribution companies in the country were trapped in a cycle
of operational losses that were funded by debt. They had accumulated losses of
Rs 3.8 lakh crore and outstanding debt of Rs 4.3 lakh crore in March 2015. The
utilities, too, are partly to blame for failing to file revised tariffs with the regulators
on time, leading to delays in approvals and the recovery of money spent.
This year, 28 of 40 utilities did not file for tariff revisions with the regulator on
time. The situation has been deteriorating, with 25 utilities failing to file tariff
revisions on time last year and 19 in the previous year.
SOurce: ET