DISCOMs AT&C Losses Decline to 17% in FY22 Due to Tough Reforms

The ACS-ARR gap in FY22 dropped by ₹0.47/kWh from FY21 level


The Aggregate Technical and Commercial (AT&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 Ministry of Power.

The AT&C losses and the gap between the Average Cost of Supply (ACS) and Average Realizable Revenue (ARR) are key indicators of DISCOMs’ performance.

A smaller AT&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.

The preliminary analysis of the data for 56 DISCOMs contributing to more than 96% of energy input indicated that their AT&C losses had come down due to the various measures taken by the ministry.

In the last two years, the AT&C losses of DISCOMs were hovering at 21-22%. According to data published by the Power Finance Corporation, AT&C losses for DISCOMs had increased from 20.73% in FY20 to 22.32% in FY21.

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.

The decline of 5 percentage points in AT&C losses and ₹0.47 (~$0.005) in the ACS-ARR gap was achieved in just one year.

Union Power Minister RK Singh, early this year, outlined the various steps taken by the government to help improve the financial health of the DISCOMs in the country.

The ministry said access to financing would be available to the DISCOMs only if they commit to reducing their AT&C losses and ACS-ARR gap within a specified timeframe.

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.

The Fifteenth Finance Commission has also provided an additional borrowing window to states contingent on taking steps to reduce their DISCOMs losses.

In June this year, the Ministry of Power notified the Late Payment Surcharge Rules, outlining the penalties and the payment structure for the DISCOMs.

The prospect of heavy penalties on delayed payments due to the new rules prompted the state-owned power DISCOMs to clear outstanding dues worth ₹246.8 billion (~$3 billion) in just four installments.