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					</table>The <a href="https://powermin.gov.in/" target="_blank" rel="noopener">Ministry of Power</a> has proposed draft provisions in the Electricity (Amendment) Rules, 2023, for subsidy accounting and payment and a framework to ensure the financial sustainability of distribution companies (DISCOMs).
The stakeholders can submit their comments and suggestions by May 11, 2023.
As per the proposed regulations, the accounting of the subsidy will be done by DISCOMs as per the standard operating procedures issued by the central government.
The state regulatory commission must release a quarterly report for each distribution licensee within its jurisdiction. The report must include an assessment of whether the DISCOM raised demands for subsidies in the relevant quarter.
It must also provide accurate accounts of the energy consumed by the subsidized and consumer categories, the per unit subsidy declared by the state government, the actual payment of subsidy, and the discrepancy between the subsidy due and paid.
The quarterly report by the state regulator will be prepared within 45 days from the end date of the respective quarter.
A second new clause specifies that the state commissions must adopt a loss reduction trajectory for tariff determination that aligns with the trajectory the relevant state governments agree upon. The trajectory must also be approved by the union government under a national program.
The state commission will determine the trajectory for the collection and billing efficiency of the DISCOMs.
The costs associated with power procurement by the DISCOMs to ensure a continuous supply of electricity to consumers will be considered as long as the procurement is conducted transparently and the appropriate commission has determined the tariff. Similarly, all costs incurred by the distribution licensee for creating, developing, and maintaining distribution system assets will be passed through.
The pass-through of costs for assets created by the distribution licensee will be subject to certain conditions.
These include adherence to the capital expenditure rollout plan approved by the state commissions, competitive and transparent procurement of assets, and proper recording of assets in the fixed asset register with geo-tagging details available on the DISCOMs’ website.
Any gains or losses resulting from deviation from the approved AT&amp;C loss reduction trajectory will be determined based on the Average Power Purchase Cost. Two-thirds of the gains will be passed on to consumers through tariffs, while the distribution licensee will retain the remainder. In case of losses, the distribution licensee will bear half, and the other half will be passed on to consumers through tariffs.
The state commission will allow a reasonable return on equity, which will be determined based on the prevailing cost of capital and an overall risk assessment. The return on equity for distribution will be aligned with that specified by the central commission for generation and transmission in its tariff regulations for the relevant period. However, appropriate modifications will be made to account for the unique risks associated with the distribution business.
Recently, the Ministry of Power <a href="https://www.mercomindia.com/comments-draft-consumers-rights-amendment" target="_blank" rel="noopener">invited</a> comments from the stakeholders on the draft Electricity (Rights of Consumers) Amendment Rules, 2023. The proposed rules seek to bring transparency and give more control to consumers when dealing with DISCOMs.
Earlier in January this year, the Ministry of Power <a href="https://www.mercomindia.com/new-electricity-rules-curb-hikes-open-access-surcharge" target="_blank" rel="noopener">made</a> changes to the Electricity Rules, 2005. According to the notification, the surcharge that open access consumers must pay, as determined by the state commissions, should not exceed 20% of the average cost of supply of power.
Subscribe to Mercom’s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don’t miss any critical updates from the renewable industry.

Ministry of Power Proposes Subsidy Accounting and Payment Framework for DISCOMs

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					</table>The average aggregate technical and commercial (AT&amp;C) losses for distribution companies (DISCOMs) at the national level increased from 20.73% in the financial year (FY) 2019-20 to 22.32% in FY 2020-21.
The widening losses are despite the distribution reform programs run by the government in the past. While Ujwal DISCOM Assurance Yojana (UDAY) had set a target for AT&amp;C losses reduction to 15% by 2019, a recently launched revamped distribution sector reform plan aims to cut AT&amp;C losses to 12-15% by 2024-25.
AT&amp;C losses reflect DISCOMs’ efficiency in recovering the cost of supplying electricity. A higher loss means lower revenue realized per unit of supply.
The numbers were revealed in Power Finance Corporation’s (<a href="https://www.pfcindia.com/Home" target="_blank" rel="noopener">PFC</a>) report on DISCOM performance. The report analyzed all state-owned DISCOMs and major private ones.
Billing efficiency decreased from 85.41% to 84.07%, while collection efficiency reduced nominally from 92.80% to 92.40% over the same period.
Kerala recorded the lowest AT&amp;C losses at 7.76%, while Nagaland had the highest at 60.39%. Daman &amp; Diu had the lowest AT&amp;C losses among Union Territories (UTs) at 4.48%.
The national average amongst all DISCOMs was 22.32%.
<img loading="lazy" decoding="async" class="aligncenter wp-image-43361" src="https://mercomindia.com/wp-content/uploads/2022/10/Screenshot-2022-10-20-144010.jpg" alt="DISCOMs AT&amp;C losses FY21" width="600" height="315" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-20-144010.jpg 2332w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-20-144010-300x158.jpg 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-20-144010-2000x1051.jpg 2000w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-20-144010-768x403.jpg 768w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-20-144010-1536x807.jpg 1536w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-20-144010-2048x1076.jpg 2048w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-20-144010-650x341.jpg 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-20-144010-624x328.jpg 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-20-144010-600x315.jpg 600w" sizes="(max-width: 600px) 100vw, 600px" />(Source: PFC (Numbers are in percentages))
The other states that had low AT&amp;C losses were Gujarat at 11.35%, Goa (12.94%), Telangana (13.33%), Tamil Nadu (13.81%), and Himachal Pradesh (14.02%).
The states with high AT&amp;C losses were the erstwhile state of Jammu and Kashmir at 59.28%, Arunachal Pradesh (44.87%), Madhya Pradesh (41.47%), Jharkhand (41.36%), and Tripura (37.36%).
The top five states which displayed a considerable reduction in AT&amp;C losses included Telangana, which reported a reduction from 21.92% in FY20 to 13.33% in FY21. Other states like Kerala reduced it from 13.12% to 7.76%, Uttarakhand from 20.35% to 15.39%, Assam from 23.39% to 18.73%, and Bihar from 39.95 to 35.33%.
Among UTs, Lakshadweep decreased its AT&amp;C losses from 13.69% in FY20 to 11.63% in FY21.
The five least performing states included Andhra Pradesh, which saw a considerable increase in its AT&amp;C losses from 10.77% in FY20 to 27.25% in FY21 compared to other states. States like Mizoram saw an increase from 20.66% to 36.53%, Madhya Pradesh from 30.38% to 41.47%, Maharashtra from 18.56% to 25.54%, and Arunachal Pradesh from 40.4% from 44.87%.
Among UTs, Andaman &amp; Nicobar Islands increased its AT&amp;C losses from 23.34% in FY20 to 51.94 in FY21. Dadra &amp; Nagar Haveli reduced from 3.56% to 5.17%, Puducherry from 18.45% from 19.92%, Delhi from 8.26% from 8.87%, and Daman &amp; Diu 4.07% from 4.48%.
One of the major contributors to the reduction in AT&amp;C losses has been the smart meters installed by the DISCOMs. While traditional meters require meter readings to be inspected physically for power generation, smart meters do not. The readings can be monitored by the consumer and the DISCOM remotely through the internet.
Remote meter reading would be a huge boon for the sector as a significant chunk of DISCOM revenue is lost due to billing inefficiencies. Smart metering will also curb electricity theft, which significantly contributes to AT&amp;C losses in many states.
Mercom had earlier <a href="https://mercomindia.com/now-time-smart-meters-india/" target="_blank" rel="noopener">reported</a> on the importance and the need for installing smart meters to reduce AT&amp;C losses.
High AT&amp;C loss also affects the performance of DISCOMs and their financial status, which is already a huge concern for developers. The Ministry of Power has <a href="https://mercomindia.com/25-state-power-utilities-downgraded-in-annual-discom-ratings/" target="_blank" rel="noopener">downgraded</a> 25 DISCOMs due to a huge difference between the revenue and cost realized per kWh, high operational and maintenance costs, poor performance on power purchases, and interest costs.

Average AT&C Losses for DISCOMs Increases to 22.32% in FY21

The aggregate technical and commercial (AT&amp;C) losses for the states and union territories under the Ujwal DISCOM Assurance Yojana (UDAY) program increased in the past one year, according to government data.
The UDAY program was launched by the Ministry of Power in November 2015 to target the debt reduction of DISCOMs. The increased losses of distribution companies are in stark contrast to the very objective of the program which is aimed at increasing the financial viability of the distribution companies (DISCOMs) in the country which are already reeling under the burden of debts.
According to the data provided by the government, as of December 2017, the AT&amp;C losses in 24 of the UDAY states and union territories stood at 22.73 percent.
According to the <a href="https://www.uday.gov.in/home.php" target="_blank" rel="noopener">UDAY portal</a>, 24 states and union territories submitted their data pertaining to the performance of their DISCOMs.
The losses incurred by many of the participant states increased in the year 2017 when compared with the preceding year of 2016. In December 2016, these states reported cumulative AT&amp;C losses of 20.3 percent; approximately 2 percent lower than the 22.73 percent AT&amp;C losses reported in December 2017.
Given the target to curtail the AT&amp;C losses to 15 percent by March 2019, the losses incurred in the past year seem way off the set goal. With the amount of losses incurred by various states in the past year, the realization of the set goal appears unlikely.
Out of the participant states, the DISCOMs of nine UDAY states and union territories underwent a huge spike in AT&amp;C losses. These states are: Chhattisgarh, Punjab, Jharkhand, Uttarakhand, Uttar Pradesh, Madhya Pradesh, Puducherry, Maharashtra, and Tripura.
In Punjab, AT&amp;C losses rose from 17.57 percent recorded in 2016 to 32.63 percent as of December 2017, signifying an aggregate loss of over 15 percent.
In the state of Chhattisgarh, the AT&amp;C losses rose to 21.55 percent from 19.34 percent recorded in 2016.
In Jharkhand, the AT&amp;C losses witnessed an almost 10 percent spike from 29.9 percent in the year 2016 to 39.27 percent by December 2017.
In the state of Uttarakhand, the losses rose from 14.02 percent in December 2016 to 26.61 percent in a year’s time.
The DISCOMs in the state of Uttar Pradesh witnessed a marginal spike in losses, which was merely over one percent from 30.21 percent (2016 December) to 31.43 percent (2017 December).
The north-eastern state of Tripura reported AT&amp;C loss of 21.4 percent, up from 16.61 percent recorded in the year 2016.
Madhya Pradesh reported AT&amp;C loss of 31.79 percent in the year 2017, up from 24.9 percent in the previous year.
Puducherry reported an increase of almost 4 percent in AT&amp;C loss levels, rising from 18.98 percent recorded in 2016 to 22.56 percent in December 2017.
The state of Maharashtra too reported an increase of about 4 percent in AT&amp;C losses, from 18.88 percent (2016 December) to 22.79 percent (2017 December).
The DISCOMs in Bihar, Meghalaya, and Manipur reported AT&amp;C loss levels of more than 30 percent.
In May 2017, <a href="https://mercomindia.com/mercom-exclusive-india-power-utilities-performance-ratings-improve-dont/" target="_blank" rel="noopener">Mercom had reported</a> that four Gujarat state power distribution utilities emerged as top performers per Integrated Rating for State Power Distribution Utilities report by the Ministry of Power. At that time, of the rated 41 DISCOMs, 26 showed an improvement in their AT&amp;C loss levels compared to the previous year. Twelve DISCOMs got their AT&amp;C loss levels below 15 percent during 2016 as compared to 10 DISCOMs during 2015.
The current level of AT&amp;C losses incurred by the distribution companies is a matter of concern. Compared to the progress made in the year 2016, 2017 has been not up to expectations even after the DISCOMs in states that joined the UDAY program have cut down their financial losses from ₹515.9 billion (~$8.14 billion) in the Financial Year (FY) 2016 to <a href="https://mercomindia.com/states-uday-program-cut-financial-losses-2017/" target="_blank" rel="noopener">₹348.3 billion (~$5.49 billion)</a> in 2017.
Mercom had <a href="https://mercomindia.com/nagaland-andaman-nicobar-islands-dadra-nagar-haveli-daman-diu-join-uday-program/" target="_blank" rel="noopener">previously reported</a> that with the joining of Nagaland and the union territories of Andaman &amp; Nicobar Islands, Dadra &amp; Nagar Haveli, and Daman &amp; Diu, the number of UDAY signatories has reached 31 (27 states and 4 union territories).
“Considering we are going into an election year, it is unlikely that there will be an improvement in the AT&amp;C and other revenue losses. Electricity is typically used as an election giveaway by states without concern for revenue collections,” said Raj Prabhu, CEO of Mercom Capital Group.

AT&C Losses Increased in Many States Under UDAY Program in 2017

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