Gap Between DISCOMs’ Cost of Supply and Revenue Increases to ₹0.95kWh in FY21

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The Average Cost of Supply (ACS) for distribution companies (DISCOMS) increased from ₹6.14 (~$0.074)/kWh in financial year (FY) 2019-20 to ₹6.19 (~$0.074)/kWh in FY 2020-21. The Average Revenue Realized (ARR) with tariff subsidy decreased from ₹5.85 (~$0.070)/kWh in FY20 to ₹5.62 (~$0.068)/kWh in FY21.

The gap with tariff subsidy received increased from ₹0.29 (~$0.0035)/kWh in FY20 to ₹0.57 (~$0.0069)/kWh in FY21. The gap with tariff subsidy received (excluding revenue grant under Ujwal DISCOM Assurance Yojana (UDAY) increased from ₹0.50 (~$0.0060)/kWh in FY20 to ₹0.71 (~$0.0085)/kWh in FY21.

The Cash Adjusted Gap increased from ₹0.83 (~$0.010)/kWh in FY20 to ₹0.95 (~$0.011)/kWh in FY21. While UDAY had set a target to reduce the ACS-ARR gap to zero by FY19, the revamped distribution sector program launched earlier this year extended the deadline to FY25.

The numbers were revealed in Power Finance Corporation’s (PFC) report on DISCOMs’ performance. The report analyzed all state-owned DISCOMs and major private ones.


DISCOMs ACS and ARR FY 21

(Source: PFC)

Most state-owned DISCOMs are struggling to recover the cost of electricity supply, which is technically referred to as the gap between ACS and ARR. Power System Operation Corporation had debarred 15 DISCOMs in six states and a Union Territory from buying or selling electricity at power exchanges for not clearing their dues to generators under the Late Payment Surcharge Rules.

According to PFC, the aggregate losses for DISCOMs stood at ₹502.81 billion (~$6.11 billion) in FY21, an increase of 66% compared to ₹302.03 billion (~$3.67 billion) in FY20.

Dadra & Nagar Haveli was the top-performing union territory with a cash-adjusted surplus of ₹0.47 (~$0.0057)/kWh. The other states and union territories that had cash adjusted surplus were Chandigarh at ₹0.41(~$0.0049)/kWh), Gujarat ₹0.12(~$0.0014)/kWh), Haryana ₹0.12(~$0.0014)/kWh), Daman & Diu ₹0.05 (~$0.00060)/kWh), and Punjab ₹0.05 (~$0.00060)/kWh). Tripura broke even.

Andaman & Nicobar had the highest ACS-ARR gap at ₹23(~$0.28)/kWh). Lakshadweep had an ACS-ARR gap of ₹19.44 (~$0.23)/kWh), Mizoram ₹6.08 (~$0.073)/kWh), Arunachal Pradesh ₹4.97 (~$0.060)/kWh), and Tamil Nadu ₹2.04 (~$0.025)/kWh).

Cost and Revenue Structure

The average Cost of Power (including own generation) for DISCOMs decreased from ₹4.73 (~$0.057)/kWh in FY20 to ₹4.69 (~$0.056)/kWh in FY21. Interest and finance charges increased from ₹0.42 (~$0.0051)/kWh to ₹0.45 (~$0.0054)/kWh. Revenue from operations decreased from ₹4.38 (~$0.053)/kWh to ₹4.21 (~$0.051)/kWh. Tariff subsidy received decreased from ₹0.93 (~$0.011)/kWh to ₹0.91 (~$0.011)/kWh.

Equity, accumulated losses, and net worth equity (including share application money pending allotment) increased to ₹3.33 trillion (~$40.27 billion) in FY21 from ₹3.23 trillion (~$39.06 billion) in FY20. Accumulated losses of distribution utilities is ₹5.16 trillion (~$62.38 billion). The combined net worth of DISCOMs is negative at 441.16 billion (~$5.37 billion).

Last December, the Ministry of Power said that 39 out of 55 electricity DISCOMs had submitted draft proposals under the ₹3.03 trillion (~$40.82 billion) reforms-based result-linked power distribution program. The program aimed to improve the operational efficiencies and financial sustainability of DISCOMs by providing financial assistance to modernize and strengthen distribution infrastructure. The program also sought to improve the reliability and quality of supply to end consumers.

Total Borrowings

Total borrowings increased from ₹5.05 trillion (~$61.05 billion) in FY20 to ₹5.86 trillion (~$70.85 billion) in FY21. State government loans as a percentage of total borrowings decreased from 15.05% in FY20 to 11.57%. This is due to the conversion of loans taken over by state governments under UDAY into grants and equity by some states.

Receivables for the sale of power

Receivables for the sale of power for DISCOMs increased from ₹2.15 trillion (~$26 billion) in FY20 to ₹2.38 trillion (~$28.77 billion) in FY21. Receivables for the sale of power increased from 140 days of sale to 161 days.

Payables for the purchase of power

Payables for purchasing power for DISCOMs increased from ₹2.56 trillion (~$30.95 billion) in FY20 to ₹2.73 trillion (~$33.01 billion) in FY21. Payables for purchasing power increased from 164 days of sale to 176 days.