Discoms' Outstanding Dues Continue An Upward Trend In 2024

Power distribution companies' outstanding dues to electricity generation companies have continued to rise since the beginning of 2024, after it fell by half from the peak last year.

As of March 14, the total outstanding dues for discoms rose to Rs 83,744.76 crore from Rs 64,867.28 crore in January. This had dropped to Rs 61,000 crore in January last year.

Overdues—payments that are already past their due dates—stood at Rs 27,673.53 crore, while current dues—payments not past their due dates—stood at Rs 56,068.23 crore, according to data available on the Ministry of Power's portal PRAAPTI.

According to analysts, the rise can be largely attributed to the 7-8% increase in tariffs and higher power demand in the fourth quarter of FY24.

“The situation is likely to improve from April onwards as discoms' income would improve simultaneously on higher sales,” said Rupesh Sankhe, vice president and power sector analyst with Elara Securities.

The annual revenue of the Indian discoms is around Rs 6-7 lakh crore, which averages to about Rs 58,000–59,000 crore monthly, according to analysts. But with higher sales, this income will also increase and their total outstanding dues, which are in the Rs 70,000–Rs 80,000 crore range, can be easily cleared, Sankhe said.

The latest edition of the Integrated Rating of Discoms, brought out by the Ministry of Power, shows that the financial conditions of discoms have improved and would have a positive impact on the payment of outstanding dues.

According to the report, aggregate technical and commercial losses of discoms improved to 15.4% in FY23, while billing efficiency improved to 87% and collection efficiency was high at 97.3%.

“Late Payment Surcharge Rules drove a reduction in payables to generation and transmission companies. The total days payable fell to 126 days and the total days receivable fell to 119 days,” the report noted.

State governments disbursed 108% of the amount booked for tariff subsidies during FY23. Further, a few states supported financial losses of discoms through subsidy grants totaling to Rs 44,000 crore during the year, it said.

Average power purchase cost increased by 71 paise/kWh during FY23, driven by 8% growth in power demand, more expensive coal imports, and higher exchange prices, especially during summers.

Union Power Minister RK Singh said that power prices have gone up because discoms have not tied up long-term resources and bought costly power on the exchanges. “We are persuading the discoms to enter into long-term PPAs for at least 85% of their electricity requirement,” the minister said.

The minister highlighted that Resource Adequacy Rules have been framed and they stipulate that discoms must tie up power sourcing to meet local demand and will be penalised for gratuitous load shedding.