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					</table><p>In a bid to improve the financial stability of the state distribution companies (DISCOMs) and establish a sustainable framework for the power sector, the <a href="https://powermin.gov.in/" target="_blank" rel="noopener">Ministry of Power</a> has amended the Electricity Rules 2005, introducing measures to streamline accounting, reporting, billing, and subsidy payment by states to the DISCOMs.</p>
<p>The need for these measures arises from improper and non-transparent accounting practices, leading to delayed or non-payment of subsidies announced by the states that have contributed to the financial distress of DISCOMs.</p>
<p>The Ministry of Power had proposed draft provisions in the Electricity (Amendment) Rules, 2023, in April this year, requesting stakeholders to submit their comments and suggestions by May 11, 2023.</p>
<p><strong>Quarterly Reports</strong></p>
<p>As per these newly introduced rules, DISCOMs will now be required to submit quarterly reports within 30 days from the end date of the respective quarter. Subsequently, the state commission will review and issue its findings within 30 days of receiving this report.</p>
<p>The quarterly reports must include details on subsidy demands raised based on the energy consumed by the subsidized categories. Additionally, the reports will encompass information regarding the subsidy amount announced by the state government and the actual payment, all in accordance with section 65 of the Electricity Act.</p>
<p>If the subsidy has not been paid in advance, the state commission will issue an order to implement the tariff without the subsidy.</p>
<p>Provisions have been set in place to ensure compliance with the Act, Rules, and Regulations regarding subsidy accounting and billing. If any discrepancies are found, the state commission will take appropriate action against those responsible for non-compliance, in line with the provisions of the Act.</p>
<p><strong>AT&amp;C Losses</strong></p>
<p>To achieve sustainability goals, a specific and reasonable target for reducing Aggregate Technical and Commercial (AT&amp;C) losses has been defined under the new amendments.</p>
<p>The state commissions will approve the AT&amp;C loss reduction trajectory during tariff determination. The trajectory must align with the one agreed upon by the respective state governments and approved by the central government under any national program or as otherwise specified. Additionally, the state commission will determine the trajectory for both collection and billing efficiency for the DISCOMs.</p>
<p>To ensure that the DISCOMs recover the full costs incurred in distributing electricity, all prudent costs of power procurement conducted transparently will be considered when approving tariffs. Similarly, the prudent costs incurred by the DISCOMs for creating and maintaining assets related to the distribution system will be accounted for, subject to the following conditions:</p>
<ul>
<li>The asset has been developed following the Capital Expenditure (CAPEX) rollout plan for DISCOM, which the respective state commission has approved.</li>
<li>The asset has been procured competitively and transparently.</li>
<li>The asset is geo-tagged and recorded in the fixed asset register.</li>
</ul>
<p>Furthermore, any gains or losses resulting from deviations from the approved AT&amp;C loss reduction trajectory will be quantified based on the Average Power Purchase Cost (APPC) and shared between the DISCOMs and consumers. Also, two-thirds of the gains will be passed on to the consumers in tariff, and the DISCOM will retain the rest. The DISCOM will bear two third of the losses, and the consumers will bear the rest.</p>
<p>The Central Electricity Authority has been assigned the responsibility of issuing guidelines to establish norms for the operation and maintenance of the distribution system.</p>
<p>Ensuring a reasonable Return on Equity (RoE) remains crucial for attracting investments in the sector. According to the new amendment, the state commission must align the RoE with the one specified by the Central Electricity Regulatory Commission in its tariff regulations for the relevant period. This alignment will be subject to appropriate modifications, considering the risks associated with the distribution business.</p>
<p>Recently, the Union Minister of New Renewable Energy and Power, R. K. Singh, in a written reply to Lok Sabha, <a href="https://www.mercomindia.com/total-outstanding-dues-discoms-half" target="_blank" rel="noopener">stated</a> that the effective enforcement of the Electricity (LPS and Related Matters) Rules in 2022 has led to a notable enhancement in the recovery of outstanding dues owed to suppliers, which includes generating and transmission companies.</p>
<p>In July 2023, the Ministry of Power <a href="https://www.mercomindia.com/power-ministry-methodology-calculate-atc-losses" target="_blank" rel="noopener">changed</a> the methodology to calculate the AT&amp;C losses to improve the collection efficiency of DISCOMs.</p>
<p>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.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/rakesh-ranjan-parashar/" class="vcard author" rel="author"><span class="fn">Rakesh Ranjan</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><div class="designboxt">
<p><img class="alignleft" style="border-radius: 50%;height: 50px;margin-top: -4px;border: 1px solid #00b451" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="50" /></p>
<p><strong style="text-decoration: underline">Rakesh Ranjan,</strong> Staff reporter at Mercom India<br />
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<p><img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="77" height="102" /><a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener"><strong style="color: #00b451">Rakesh Ranjan</strong></a> is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). <a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" rel="noopener noreferrer">More articles from Rakesh Ranjan.</a></p>
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Ministry Introduces Strict Measures for Subsidy Accounting and Billing for DISCOMs


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					</table><p>In a move to improve the collection efficiency of distribution companies (DISCOMs), the <a href="https://powermin.gov.in/" target="_blank" rel="noopener">Ministry of Power</a> has changed the methodology to calculate Aggregate Technical and Commercial (AT&amp;C) losses.</p>
<p>The existing methodology was reviewed after weighing the feedback from DISCOMs, who said that it restricted the collection efficiency to 100%, and the efforts of the DISCOMs in realizing the past dues and liquidation of outstanding subsidies were not reflected in the calculation of AT&amp;C losses.</p>
<p>Collection efficiency is an indicator of the amount collected from consumers with respect to the amount billed to them. Collection efficiency can be computed using the formula given below:</p>
<p>Collection Efficiency = Revenue Collected (In Rupees)/Billed Amount</p>
<p>The revenue collected excludes the arrears.</p>
<p>According to the recent modifications, the net input energy and energy sold calculations will exclude open access or wheeling units when determining billing efficiency. Previously, DISCOMs were obligated to report gross energy purchased, encompassing the total power purchased, including transmission losses.</p>
<p>For the revenue from the sale of energy no adjustment will be made in revenue from the sale of energy on account of unbilled revenue.</p>
<p>Furthermore, when computing the adjusted revenue from the sale of energy based on the subsidy received, the total amount of tariff subsidy received throughout the year, including any outstanding payments, will be incorporated into the calculation.</p>
<p>Earlier, the details of the subsidy booked during the year and the subsidy received against the current year and against previous years formed a part of the annual accounts as notes.</p>
<p>Further, to calculate the collection efficiency, the actual collection efficiency of the subsidy received and the realization from the sale of power together in the current financial year will be taken into account.</p>
<p>As per the existing methodology, debtors for the trading of power were not adjusted for the calculation of collection efficiency since the information was generally not available in notes to accounts.</p>
<p>The AT&amp;C losses of DISCOMs <a href="https://www.mercomindia.com/discoms-atc-losses-decline-17-fy22-tough-reforms" target="_blank" rel="noopener">declined</a> significantly to ~17% in the financial year 2021-22 from 22.32% in 2020-21.</p>
<p>In April this year, the Ministry of Power <a href="https://www.mercomindia.com/ministry-of-power-subsidy-accounting-framework-discoms" target="_blank" rel="noopener">proposed</a> draft provisions in the Electricity (Amendment) Rules, 2023, for subsidy accounting and payment and a framework to ensure the financial sustainability of DISCOMs.</p>
<p>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.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/rakesh-ranjan-parashar/" class="vcard author" rel="author"><span class="fn">Rakesh Ranjan</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><div class="designboxt">
<p><img class="alignleft" style="border-radius: 50%;height: 50px;margin-top: -4px;border: 1px solid #00b451" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="50" /></p>
<p><strong style="text-decoration: underline">Rakesh Ranjan,</strong> Staff reporter at Mercom India<br />
<a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener">More articles from Rakesh Ranjan.</a></p>
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<p><img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="77" height="102" /><a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener"><strong style="color: #00b451">Rakesh Ranjan</strong></a> is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). <a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" rel="noopener noreferrer">More articles from Rakesh Ranjan.</a></p>
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Power Ministry Changes Methodology to Calculate AT&C Losses


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					</table><p>Stricter regulations around financing, severe penalties for non-payment of dues, mandatory energy accounting, and auditing are the driving factors behind the considerable improvement in the otherwise sluggish performance of state distribution companies (DISCOM) over the past year.</p>
<p>The Ministry of Power recently <a href="https://www.mercomindia.com/discoms-atc-losses-decline-17-fy22-tough-reforms" target="_blank" rel="noopener">published</a> data notifying a considerable decline in Aggregate Technical and Commercial (AT&amp;C) losses and the gap between the Average Cost of Supply (ACS) and Average Realizable Revenue (ARR), the key indicators of DISCOMs’ performance.</p>
<p>The AT&amp;C losses of DISCOMs declined significantly to ~17% in the financial year (FY) 2021-22 from 22.32% in FY 2020-21. The gap between ACS and ARR declined 68% to ₹0.22 (~$0.002)/kWh in FY22 from ₹0.69 (~$0.008)/kWh in FY21.</p>
<p>A smaller AT&amp;C losses figure suggests that a DISCOM efficiently supplies electricity with minimal leakages. A lower ACS-ARR gap shows that a DISCOM is recouping most of the operational costs.</p>
<p>The improvement comes after the Ministry of Power recently revised norms of lending agencies like the Power Finance Corporation (PFC) and REC, restricting them from financing loss-making DISCOMs without any action plan to improve within a specific timeframe.</p>
<p>On average, India’s DISCOMs face a loss of ₹0.93 (~$0.011)/kWh of input energy, as <a href="https://www.mercomindia.com/state-owned-discoms-continue-to-impede-renewables-growth" target="_blank" rel="noopener">reported</a> by Mercom previously, which means most DISCOMs are perennially dependent on loans for day-to-day operations and are unable to modernize systems and bring in new technology.</p>
<p>In the absence of such loans for clearing the dues they owe to generating companies, DISCOMs are left with no option but to improve the collection, reflected in the narrowing ACS-ARR gap.</p>
<p>The government has identified PFC to be one of the nodal agencies to work on the financial conditions of DISCOMs, with dedicated members placed on the boards of these DISCOMs.</p>
<p>At the recent <a href="https://www.mercomindia.com/event/renewables-summit-2023" target="_blank" rel="noopener">Mercom Renewables Summit 2023</a>, P K Sinha, ED (Projects) at <a href="https://www.pfcindia.com/" target="_blank" rel="noopener">PFC</a>, spoke about the various steps the government has taken under the Revamped Distribution Sector Scheme (RDSS) to make DISCOMs more efficient.</p>
<p>Sinha said, “Under RDSS, grants worth ₹3.3 trillion (~$40.35 billion) are to be disbursed to state DISCOMs for energy efficiency. But the government has now placed a clause for the DISCOMs to reduce their AT&amp;C losses to 12% from 15% if they were to be eligible for these funds. If the efficiency parameters aren’t achieved, the grants are converted into loans, which has made the utilities more vigilant.”</p>
<p>The criterion for grants also mandates DISCOMs to clear all the due subsidies by the end of every financial year and the accounts to be prepaid.</p>
<p>Endorsing Sinha’s view, Hitesh Paliwal, Senior VP &amp; Zonal Head, North Zone Corporate Banking Group at <a href="https://bank.sbi/" target="_blank" rel="noopener">SBI</a>, said, “All the banks under the ministry have been notified to implement these criteria before approving loans for the state DISCOMs, as they approach the banks after state lending institutions turn them away.”</p>
<p>The Ministry of Power has also <a href="https://www.mercomindia.com/discoms-allowed-clear-dues-generators-48-installments" target="_blank" rel="noopener">issued</a> Late Payment Surcharge Rules, which provide that unless the DISCOMs promptly pay for the power drawn from the interstate transmission system, their access to the power exchange will be blocked.</p>
<p>The RDSS program states that funding under the program will be available only if the DISCOM commits to an agreed loss reduction trajectory.</p>
<p>Sinha said, “The DISCOMs have to sign a trajectory agreement promising a definite reduction in AT&amp;C and ARR-ACS gap. This is then monitored and evaluated every quarter by the Ministry in a review meeting that lasts for two days. The minister and senior officers interact with the utility heads to identify challenges and things that can be done to improve their performance.”</p>
<p>With heavy penalties coming into the picture, DISCOMs have improved their payment mechanism over time, thus benefiting the power generators in the process.</p>
<p>Last year, the Ministry of Power made a series of presentations before the 15th Finance Commission. The Commission provided an additional borrowing window to states considering the steps they took to reduce their DISCOMs losses. Union Power Minister R.K. Singh had <a href="https://www.mercomindia.com/power-minister-steps-improve-health-discoms" target="_blank" rel="noopener">outlined</a> the steps the government took to help improve the financial health of the DISCOMs in the country.</p>
<p>The Ministry has also recently <a href="https://www.mercomindia.com/ministry-of-power-subsidy-accounting-framework-discoms" target="_blank" rel="noopener">proposed</a> draft provisions in the Electricity (Amendment) Rules, 2023, for subsidy accounting and payment and a framework to ensure the financial sustainability of DISCOMs.</p>
<p>The inefficiency of DISCOMs threatens the viability of many renewable energy projects due to delayed payments and renegotiations on power purchase agreements.</p>
<p>While the push to privatize state-owned DISCOMs continues to grow, the government is seen implementing various measures to ensure they stay viable long-term.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/satish-shetty/" class="vcard author" rel="author"><span class="fn">Satish Shetty</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><div class="designboxt">
<p><img class="alignleft" style="border-radius: 50%;height: 50px;margin-top: -4px;border: 1px solid #00b451" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/04/Satish-pic-1.jpg" width="50" /></p>
<p><strong style="text-decoration: underline">Satish Shetty,</strong> Associate Editor at Mercom India<br />
<a href="https://mercomindia.com/author/satish-shetty/" target="_blank" rel="noopener">More articles from Satish Shetty.</a></p>
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<div class="authorboxn"><img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/04/Satish-pic-1.jpg" width="102" height="102" /><a href="https://mercomindia.com/author/satish-shetty/" target="_blank" rel="noopener"><strong style="color: #00b451">Satish Shetty</strong></a> is an Associate Editor with Mercom India. Prior to Mercom, Satish was a multimedia news producer at Reuters, where he gained experience in digital news media. Satish has his Bachelor of Arts (B.A.) degree in Broadcast Journalism from Limkokwing University of Creative Technology, Malaysia.<br />
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Strict Financing Rules & Penalties for Non-Payment Help Improve DISCOMs’ Performance


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					</table><p>The Aggregate Technical and Commercial (AT&amp;C) losses of distribution companies (DISCOMs) declined significantly to ~17% in the financial year (FY) 2021-22 from 22.32% in FY 2020-21, according to the recent data published by the <a href="https://powermin.gov.in/" target="_blank" rel="noopener">Ministry of Power</a>.</p>
<p>The AT&amp;C losses and the gap between the Average Cost of Supply (ACS) and Average Realizable Revenue (ARR) are key indicators of DISCOMs’ performance.</p>
<p>A smaller AT&amp;C losses figure suggests that a DISCOM is efficient in supplying electricity with minimal leakages. A lower ACS-ARR gap shows that a DISCOM is recouping most of the operational costs.</p>
<p>The preliminary analysis of the data for 56 DISCOMs contributing to more than 96% of energy input indicated that their AT&amp;C losses had come down due to the various measures taken by the ministry.</p>
<p>In the last two years, the AT&amp;C losses of DISCOMs were hovering at 21-22%. According to data <a href="https://mercomindia.com/average-atc-losses-for-discoms-increases-to-22-in-fy21/" target="_blank" rel="noopener">published</a> by the Power Finance Corporation, AT&amp;C losses for DISCOMs had increased from 20.73% in FY20 to 22.32% in FY21.</p>
<p>The gap between ACS and ARR on a subsidy received basis, excluding the regulatory income and Ujwal DISCOM Assurance Yojana (UDAY) grant, declined to ₹0.22 (~$0.002)/kWh in FY22 from ₹0.69 (~$0.008)/kWh in FY21.</p>
<p>The decline of 5 percentage points in AT&amp;C losses and ₹0.47 (~$0.005) in the ACS-ARR gap was achieved in just one year.</p>
<p>Union Power Minister RK Singh, early this year, <a href="https://mercomindia.com/power-minister-steps-improve-health-discoms/" target="_blank" rel="noopener">outlined</a> the various steps taken by the government to help improve the financial health of the DISCOMs in the country.</p>
<p>The ministry said access to financing would be available to the DISCOMs only if they commit to reducing their AT&amp;C losses and ACS-ARR gap within a specified timeframe.</p>
<p>Funds are available for DISCOMs from lending agencies like the Power Finance Corporation and REC Limited and under programs for strengthening the distribution system and the Revamped Distribution Sector Program.</p>
<p>The Fifteenth Finance Commission has also provided an additional borrowing window to states contingent on taking steps to reduce their DISCOMs losses.</p>
<p>In June this year, the Ministry of Power <a href="https://mercomindia.com/discoms-allowed-clear-dues-generators-48-installments/" target="_blank" rel="noopener">notified</a> the Late Payment Surcharge Rules, outlining the penalties and the payment structure for the DISCOMs.</p>
<p>The prospect of heavy penalties on delayed payments due to the new rules <a href="https://mercomindia.com/heavy-penalty-prompts-dues-worth-%e2%82%b9246-8-billion-since-june/" target="_blank" rel="noopener">prompted</a> the state-owned power DISCOMs to clear outstanding dues worth ₹246.8 billion (~$3 billion) in just four installments.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/satish-shetty/" class="vcard author" rel="author"><span class="fn">Satish Shetty</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><div class="designboxt">
<p><img class="alignleft" style="border-radius: 50%;height: 50px;margin-top: -4px;border: 1px solid #00b451" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/04/Satish-pic-1.jpg" width="50" /></p>
<p><strong style="text-decoration: underline">Satish Shetty,</strong> Associate Editor at Mercom India<br />
<a href="https://mercomindia.com/author/satish-shetty/" target="_blank" rel="noopener">More articles from Satish Shetty.</a></p>
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<div class="authorboxn"><img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/04/Satish-pic-1.jpg" width="102" height="102" /><a href="https://mercomindia.com/author/satish-shetty/" target="_blank" rel="noopener"><strong style="color: #00b451">Satish Shetty</strong></a> is an Associate Editor with Mercom India. Prior to Mercom, Satish was a multimedia news producer at Reuters, where he gained experience in digital news media. Satish has his Bachelor of Arts (B.A.) degree in Broadcast Journalism from Limkokwing University of Creative Technology, Malaysia.<br />
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DISCOMs AT&C Losses Decline to 17% in FY22 Due to Tough Reforms

<p>Union Minister R.K. Singh replied to a question in the Rajya Sabha on whether the government has reviewed the assistance provided to states and power distribution companies (DISCOMs) under the Ujwal Discom Assurance Yojana (UDAY) program.</p>
<p>The minister informed that the Aggregate Technical &amp; Commercial (AT&amp;C) losses at the all India level have reduced from 23.70% in financial year (FY) 2015-16 to 21.83% in FY 2019-20, an 2% reduction in the five years.</p>
<p>While 18 DISCOMs witnessed a decline in AT&amp;C losses, 12 DISCOMs saw an increase in AT&amp;C losses between FY 2016 and 2020.</p>
<p>In February 2018, Mercom had <a href="https://mercomindia.com/states-atc-loss-uday/" target="_blank" rel="noopener">reported</a> that AT&amp;C losses for the states and union territories under the UDAY had program increased from the previous year, according to government data. Ironically, the UDAY program was launched in the country to reduce the losses incurred by the distribution companies.</p>
<p>In its reply to the Rajya Sabha last month, the minister shared state-wise details regarding AT&amp;C losses between FY 2015-16 and FY 2019-20.</p>
<p><a href="https://mercomindia.com/wp-content/uploads/2021/08/State-Wise-ATC-Loss-1-3.png"><img decoding="async" loading="lazy" class="aligncenter size-full wp-image-28208" src="https://mercomindia.com/wp-content/uploads/2021/08/State-Wise-ATC-Loss-1-3.png" alt="State-Wise AT&amp;C Loss (%)" width="512" height="873" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2021/08/State-Wise-ATC-Loss-1-3.png 512w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2021/08/State-Wise-ATC-Loss-1-3-176x300.png 176w" sizes="(max-width: 512px) 100vw, 512px" /></a></p>
<p>During the five years, AT&amp;C losses in Mizoram fell sharply by 41%, followed by Haryana (38%) and Manipur (36%).</p>
<p>Meanwhile, AT&amp;C losses in Telangana surged by 71% during the five years, followed by Nagaland (58%) and Chhattisgarh (26%).</p>
<p>In March 2019, Mercom had reported that ₹5.75 billion (~$77.46 million) given to six states (Gujarat, Rajasthan, Jharkhand, Punjab, Telangana, and Kerala) to curtail their AT&amp;C losses remained <a href="https://mercomindia.com/5-75-billion-six-states-a-c-losses-unutilized/" target="_blank" rel="noopener">unutilized</a>.</p>
<p>The Power Finance Corporation (<a href="http://www.pfcindia.com/" target="_blank" rel="noopener">PFC</a>) had written to these six states regarding the timely completion of implementing the supervisory control and data acquisition (SCADA) /distribution management system (DMS) under the government’s Restructured Accelerated Power Development and Reforms Program (R-APDRP) to enhance reliability in the power distribution network.</p>
<p>During the five years between FY 2016 and 2020, Gujarat’s AT&amp;C losses fell by 26%, Rajasthan’s losses were down by 6%, and Punjab’s losses were down by 10%. Jharkhand’s losses surged by 11%. As mentioned above, Telangana’s losses are the highest across the country.</p>
<p>In June this year, Union Finance Minister Nirmala Sitharaman had <a href="https://mercomindia.com/finance-minister-announces-%e2%82%b93-03-trillion-upgrading-discoms/" target="_blank" rel="noopener">announced</a> the ‘Economic Relief from Pandemic’ package and declared several sops for DISCOMs, including ₹3.03 trillion (~$40.82 billion) outlay for reform-based result-linked power distribution program.</p>
<p>Last month, the MOP <a href="https://mercomindia.com/ministry-power-plan-revamp-discoms/" target="_blank" rel="noopener">issued</a> detailed guidelines for reform-based result-linked power distribution programs over the next five years.</p>
<p>The program aims to improve power supply quality and reliability through a financially sustainable and operationally efficient distribution sector. The plan is to reduce the aggregate technical and commercial (AT&amp;C) losses across India to 12-15% and eliminate the gap between the average supply cost and the aggregate revenue requirement by 2024-25.</p>
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<p><em>Note: Percentage in the title has been updated from 8% to 2%</em></p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/rahul-nair/" class="vcard author" rel="author"><span class="fn">Rahul Nair</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><p><img class="alignleft" src="https://mercomindia.com/wp-content/uploads/2022/02/Rahul-Nair.png" width="86" height="102" />Rahul is a staff reporter at Mercom India. Before entering the world of renewables, Rahul was head of the Gujarat bureau for The Quint. He has also worked for DNA Ahmedabad and Ahmedabad Mirror. Hailing from a banking and finance background, Rahul has also worked for JP Morgan Chase and State Bank of India. <a href="https://mercomindia.com/author/rahul-nair/" rel="noopener noreferrer">More articles from Rahul Nair.</a></p>
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AT&C Losses Among Distribution Companies Dips by 2% Between FY 2016 and 2020

<p>Reform-linked borrowings have provided the necessary impetus for reforms in the power sector in many states in the country. According to the latest figures released by the <a href="https://finmin.nic.in/" target="_blank" rel="noopener">Ministry of Finance</a>, five more states &#8211; Bihar, Goa, Karnataka, Rajasthan, and Uttarakhand &#8211; have met the target of reduction in Aggregate Technical and Commercial (AT&amp;C) losses or achieved the targeted reduction in Average Cost of Supply and Average Revenue Realization (ACS-ARR) gap.</p>
<p>The reduction of AT&amp;C losses and ACS-ARR gap are two of the three reforms put forward by the Ministry of Finance. The borrowing cap for the states is linked to undertaking reforms in the power sector. The states are eligible to borrow an amount equal to 0.05% of the gross state domestic product (GSDP) for meeting the reduction in AT&amp;C losses and an additional 0.5% for meeting the ACS-ARR gap target.</p>
<p>Uttarakhand led the way in both the reduction in AT&amp;C losses and the ACS-ARR gap. The state achieved the target of 19.01% for the AT&amp;C losses as against the target of 19.35%. For the ACS-ARR gap target, the state achieved a figure of ₹0.36 (~$0.0048)/kWh as against the target of ₹0.40 (~$0.0054)/kWh. Goa was another state that brought the AT&amp;C losses to 11.21% as against the target of 13.53%.</p>
<p>Karnataka reduced the ACS-ARR gap to ₹0.44 (~$0.0059)/kWh compared to the target of ₹0.50 (~$0.0067)/kWh. Rajasthan also achieved the target and reduced the gap to ₹1.16 (~$0.015)/kWh compared to the target of ₹1.40 (~$0.018)/kWh.</p>
<p>Meeting the reform requirements has made these states eligible to mobilize additional resources of ₹20.94 billion (~$283.2 million), which have helped them fight the COVID-19 pandemic and enhance capital expenditure.</p>
<p>Andhra Pradesh and Madhya Pradesh have undertaken the third reform in the power sector, the Direct Benefit Transfer of electricity to farmers. Consequently, the two states were permitted additional borrowings of ₹29.38 billion (~$397.37 million). As of now, the seven states which have undertaken power sector reforms have been permitted additional borrowings of ₹50.32 billion (~$680.59 million).</p>
<p>The power sector reforms introduced by the Ministry of Finance aim at creating a hassle-free and transparent process in place for providing power subsidies to farmers and prevent leakages. The reforms also aim at improving the health of the distribution companies (DISCOMs) sustainably by providing them liquidity.</p>
<p>To help the states fight the challenges posed by the COVID-19 pandemic, the central government had increased the states&#8217; borrowing limits to 2% of their GSDP.</p>
<p>In all, 21 states have carried out at least one reform measure and have been granted reform-linked borrowings. The total reform-linked additional borrowing permission to states stood at ₹916.67 billion (~$12.39 billion).</p>
<p>In September last year, the Andhra Pradesh government decided to <a href="https://mercomindia.com/farmers-andhra-pradesh-power-subsidies/" target="_blank" rel="noopener">introduce</a> the Direct Benefit Transfer on the subsidy extended as free electricity to farmers. The decision came after the central government <a href="https://mercomindia.com/electricity-act-amendment-draft/" target="_blank" rel="noopener">issued</a> a draft proposal for the amending the Electricity Act 2003 to address issues in the power sector.</p>
<p>Earlier, Mercom <a href="https://mercomindia.com/5-75-billion-six-states-a-c-losses-unutilized/" target="_blank" rel="noopener">reported</a> that the Power Finance Corporation had written to six states about implementing the supervisory control and data acquisition (SCADA)/distribution management system under the government&#8217;s Restructured Accelerated Power Development and Reforms Program (R-APDRP) to enhance reliability in the power distribution network.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/rakesh-ranjan-parashar/" class="vcard author" rel="author"><span class="fn">Rakesh Ranjan</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><div class="designboxt">
<p><img class="alignleft" style="border-radius: 50%;height: 50px;margin-top: -4px;border: 1px solid #00b451" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="50" /></p>
<p><strong style="text-decoration: underline">Rakesh Ranjan,</strong> Staff reporter at Mercom India<br />
<a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener">More articles from Rakesh Ranjan.</a></p>
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<p><img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="77" height="102" /><a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener"><strong style="color: #00b451">Rakesh Ranjan</strong></a> is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). <a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" rel="noopener noreferrer">More articles from Rakesh Ranjan.</a></p>
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