Discom dues swell despite govt’s Atmanirbhar boost

Analysts expect further disbursals of ₹35,000 crore by the end of this fiscal (mainly to Uttar Pradesh, Andhra Pradesh and Telangana) and another tranche in the first quarter of FY22 to bring down the stress.

The central government’s ₹1.26 trillion Atmanirbhar package for state power distribution companies (discoms) has failed to have the desired effect thanks to tough conditions, slow disbursals and bank loans which are easier to get. Discoms’ overdues to power generation companies rose from ₹94,000 crore in June 2020 when the scheme was announced to ₹1.28 trillion by 31 December, data from the central government’s Praapti portal showed, even as much of the scheme’s funds remain unused.

Power generators give discoms 45-60 days to pay for the electricity supplied to them. Delays beyond this are classified as overdues, attracting a penal interest. (HT Photo)

Power generators give discoms 45-60 days to pay for the electricity supplied to them. Delays beyond this are classified as overdues, attracting a penal interest.

While loans to discoms have been sanctioned to the full extent of ₹1.25 trillion, disbursals have only touched ₹46,100 crore, a report by ICICI Securities said. While disbursals did slow down the growth of overdues, aggregate amounts remain high.

“Disbursements under the Atmanirbhar package have been quite slow,” a top executive at a private sector power generation company said. “State governments have either not been willing to adhere to the strict conditions of these loans set by PFC (Power Finance Corp. Ltd) and REC Ltd or some states, like Maharashtra, have been able to raise funds from banks at similar rates. So generators, particularly those selling renewable energy, have not seen payments rise the way we expected them to when the package was announced. Hopefully, now that the lockdown is fully lifted and collections (from customers) for discoms can pick up again, we might see payments come in more regularly in the next few months,” the executive said on condition of anonymity.

Analysts expect further disbursals of ₹35,000 crore by the end of this fiscal (mainly to Uttar Pradesh, Andhra Pradesh and Telangana) and another tranche in the first quarter of FY22 to bring down the stress.

“I think state-owned power generation companies are bearing the brunt of unpaid dues,” Rahul Modi, vice-president, ICICI Securities, said over the phone. “The recent financials of NTPC and some listed private sector power companies show that debtor overdues have come down in the December quarter or have stayed flat, which means that some of the overdue amounts have been paid. Large players that are able to manage these payment delays because of their balance sheet strength are doing alright while smaller players and some renewable energy companies are suffering. I think the Atmanirbhar package is working much slower than what the industry expected when it was announced.”

Discoms now owe over ₹40,600 crore to private sector thermal power producers, ₹12,000 crore to renewable energy firms and ₹31,600 crore to generation companies owned by state government companies. They also have large overdues with central government entities such as NTPC.

One bright spot is that some states are starting to implement the reforms suggested by the central government. Madhya Pradesh and Andhra Pradesh, for instance, have started piloting power subsidy direct benefit transfers to farmers in Vidisha and Srikakulam districts, with plans to expand it next fiscal year. This has allowed both states to raise additional financial resources to the tune of 0.15% of state GDP through open market borrowings, the carrot that the central government offered for revamping the sector.

“The reforms have been aimed at creating a transparent and convenient provision of power subsidy to farmers and prevent leakages,” the ICICI Securities report said. “It also aims at improving the health of power distribution companies by alleviating their liquidity stress in a sustainable manner.”