The increasing electricity demand in the country is challenging for the distribution companies

- The improvement seen in the condition of cash-strapped discoms must be sustained

A report by the Power Finance Corporation, providing a picture of the financial position of 71 power distribution companies in the country for the year 2022, indicates that the condition of the country's discoms is improving, but the condition has not improved as fast as expected. Despite the various schemes and support provided by the government to help discoms, the situation is not yet commendable. Particularly high debt burdens still make the future of discoms look bleak. The gap between the cost of providing electricity and the average revenue has come down from 79 paise per unit in fiscal 2020 to 40 paise per unit in 2022 which is a good thing as it has increased the cash flow of discoms, he said. can be Aggregate technical deficit which was 21.50 percent in FY2021 also came down to 16.50 percent.

The loss target has been set at 12 to 15 percent for discoms to take advantage of the revamped distribution sector scheme announced by the central government. Under various schemes of the central government, financial assistance to discoms has been standardized on the basis of their performance.

Out of 71 discoms, 65 discoms announced tariff revision schemes for FY 2023. 58 discoms made such an announcement in financial year 2022. In financial year 2022, the loss before tax of discoms came down to Rs 28,700 crore which was Rs 50,281 crore in financial year 2021. The reason behind the decrease in deficit lies in the subsidies provided by the state governments which increase the revenue of the discoms. Apart from this, the state government has taken over the debts of discoms as equities, which has seen a slight reduction in its debt. The improvement in the figures for the power sector in the country which has been under constant pressure due to political interference is welcome but also needs to be sustained.

On the one hand, the demand for electricity is increasing in the country, while on the other hand, the high debt burden of discoms and declining investments in the power sector are becoming a matter of concern. The amount of debt on discoms increased to Rs 6.20 lakh crore at the end of financial year 2022. In the period of financial year 2020 to 2022, the increase in capital expenditure has come down from Rs 59,000 crore to Rs 48,000 crore. Interest expenses of discoms are also increasing due to increase in debt burden. Discoms are thus still stuck in the vicious cycle of debt.

Various schemes were implemented in the last 16-17 years to improve the condition of discoms. Despite various support schemes, the financial position of discoms has been relatively poor. The poor financial condition of discoms is having a direct impact on power generating companies. Due to lack of funds, discoms cannot pay bills to power producers on time.

Discoms are unable to pay the bills due to power distribution, on the other hand the situation of power generators is strained due to increase in coal prices. High coal prices are increasing the cost of power generation. Private power generation companies are currently facing working capital pressure. Most of the arrears owed by discoms to power producers are from private power producers. Demand for electricity has crossed 200 gigawatts in April due to rising temperatures across the country. Such a huge demand for electricity has been seen for the first time in April.

The current high demand for electricity in the country is being supported by coal-based power supply. In the coming days, the power demand will further increase and is expected to reach 230 giga watts. Due to increase in power demand in the country, dependence on coal-fired power units has increased, due to which the consumption of coal is also expected to reach a high level. To ensure that there is no power crisis in the country during summer, the central government has instructed the coal-based power generation units to work at full capacity and to increase coal imports.

An increase in power consumption can be said to mean a further increase in the financial burden on the discoms. As discoms do not make timely payments to power producers, not only do power producers shy away from making new investments to increase power generation, they are also reluctant to supply excess power to discoms. If discoms do not get power, it will not directly affect industrial operations. In such a situation, there is an urgent need to speed up reforms in the power sector. How power shortage affects industrial operations has been seen many times before. While Corona has rocked the country's economy, it is essential that the state governments and the Center maintain continuity in the discipline measures taken in the country's power distribution sector before the power shortage causes the country's economic growth to stall, otherwise whatever improvement has started to be seen in the state of the discoms will be washed away. It will not be wrong to say that it will not take long and the situation will return to the way it was.