Even as the electricity consumption has reached the pre-Covid level, the power distribution companies (discoms) continue to be battered by low revenue recovery, leading to mounting dues of the power generation companies.  

The fall in revenue realisation is posing a renewed threat to the financial stability of the discoms. The UP Power Corporation Limited, along with its five wholly owned subsidiaries, have piled up an additional Rs 14,000 crore as overdue to generation companies during the first half of the current fiscal 2020-21.

As a result, their overdue to gencos rose from Rs 34,000 crore at end of 2019-20 to over Rs 37,000 crore by September end, despite these entities having paid Rs 10,500 crore received as soft loan from PFC-REC under a special liquidity facility under Atmanirbhar package announced by the Centre in May this year. 

The Union Power Ministry has recently increased the size of the liquidity package to Rs 1.2 lakh crore from Rs 90,000 crore planned initially. The government and PFC-REC have also been rather quick in sanctioning funds under the scheme (Rs`1.1 lakh crore so far). Also, in order to help the cash-strapped discoms, the Power Ministry has reduced late payment surcharges, a move that could potentially provide a relief of about Rs 6,000 crore annually to them. However, even these steps appear to be inadequate in reducing the mounting dues of discoms to power producers. 

A letter of credit (LC) mechanism has been in force since August 2019 to compel discoms to become more disciplined in meeting their payment obligations. The overdues — payment default of 45-60 days or more — of all state-run discoms in the country to power plants increased to 52 percent annually to Rs 1.2 lakh crore at August end.

According to UPPCL sources, the total dues to gencos of central sector power producers are   Rs 21,000 crore and the rest Rs 13,000 crore are of the private sector .Against a loan of Rs 21,000 crore sought from PFC-REC under the Atmanirbhar scheme to clear the dues to these two categories of suppliers, half the amount (Rs 10,500 crore) has been received and paid to these entities. 

In addition to the pending legacy dues of Rs 13,000 crore to state government-run power PSUs, UPPCL has piled up another Rs 15,000 crore of power purchase liabilities in the first half of this year.

The UP discoms’ overdues to gencos have been rising steadily, chiefly because of operational inefficiencies, including the discoms’ inability to reduce AT&C losses and the gap between the average cost of supply (ACS) and the average revenue realisation (ARR). 

While the AT&C losses stood at a whopping 30.30 percent in 2019-20 against the UDAY target of 14.86 percent, the ACS-ARR gap stood at 70 paise per unit sold by the UPPCL.

Another major reason for the high losses is the fact that while the state government has increased the supply hours, it has been unable to collect the revenues efficiently. In 2019-20, only 38.5 percent of  2.09 crore rural consumers paid their electricity bills, and since April this year, only 17.73 percent of such consumers have paid at least once. In urban areas, only 72.5 percent of the 72 lakh consumers have paid electricity bills at least once since April.

Moreover, the UPPCL also faces the problem of having a large number of unmetered connections. Of the total consumer base of  2.81 crore , about 26 lakh connections are unmetered. And out of these unmetered connections, private tube wells consumers account for 46 percent (11.95 lakh).

“Increase in supply hours for agricultural consumers clubbed with low tariffs and poor collection efficiency have resulted in further widening of the cash gap,” an official said, adding that increasing revenue collection from rural consumers was a monumental challenge and that all efforts at disconnection drives had been rendered ineffective due to the illegal restoration by many consumers.