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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


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					</table><p>The Average Cost of Supply (ACS) for distribution companies (DISCOMS) increased from ₹6.14 (~$0.074)/kWh in financial year (FY) 2019-20 to ₹6.19 (~$0.074)/kWh in FY 2020-21. The Average Revenue Realized (ARR) with tariff subsidy decreased from ₹5.85 (~$0.070)/kWh in FY20 to ₹5.62 (~$0.068)/kWh in FY21.</p>
<p>The gap with tariff subsidy received increased from ₹0.29 (~$0.0035)/kWh in FY20 to ₹0.57 (~$0.0069)/kWh in FY21. The gap with tariff subsidy received (excluding revenue grant under Ujwal DISCOM Assurance Yojana (UDAY) increased from ₹0.50 (~$0.0060)/kWh in FY20 to ₹0.71 (~$0.0085)/kWh in FY21.</p>
<p>The Cash Adjusted Gap increased from ₹0.83 (~$0.010)/kWh in FY20 to ₹0.95 (~$0.011)/kWh in FY21. While UDAY had set a target to reduce the ACS-ARR gap to zero by FY19, the revamped distribution sector program launched earlier this year extended the deadline to FY25.</p>
<p>The numbers were revealed in Power Finance Corporation’s (<a href="https://www.pfcindia.com/Home" target="_blank" rel="noopener">PFC</a>) report on DISCOMs’ performance. The report analyzed all state-owned DISCOMs and major private ones.</p>
<p><img decoding="async" loading="lazy" class="aligncenter wp-image-43412" src="https://mercomindia.com/wp-content/uploads/2022/10/Screenshot-2022-10-21-134006-scaled.jpg" alt="DISCOMs ACS and ARR FY 21" width="600" height="337" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-21-134006-scaled.jpg 2560w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-21-134006-300x169.jpg 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-21-134006-2000x1124.jpg 2000w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-21-134006-768x432.jpg 768w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-21-134006-1536x863.jpg 1536w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-21-134006-2048x1151.jpg 2048w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-21-134006-650x365.jpg 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-21-134006-844x475.jpg 844w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-21-134006-624x351.jpg 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/10/Screenshot-2022-10-21-134006-600x337.jpg 600w" sizes="(max-width: 600px) 100vw, 600px" /></p>
<p style="text-align: center;">(Source: PFC)</p>
<p>Most state-owned DISCOMs are struggling to recover the cost of electricity supply, which is technically referred to as the gap between ACS and ARR. Power System Operation Corporation had <a href="https://mercomindia.com/posoco-forbids-15-discoms-from-trading-in-power-exchanges/" target="_blank" rel="noopener">debarred</a> 15 DISCOMs in six states and a Union Territory from buying or selling electricity at power exchanges for not clearing their dues to generators under the Late Payment Surcharge Rules.</p>
<p>According to PFC, the aggregate losses for DISCOMs stood at ₹502.81 billion (~$6.11 billion) in FY21, an increase of 66% compared to ₹302.03 billion (~$3.67 billion) in FY20.</p>
<p>Dadra &amp; Nagar Haveli was the top-performing union territory with a cash-adjusted surplus of ₹0.47 (~$0.0057)/kWh. The other states and union territories that had cash adjusted surplus were Chandigarh at ₹0.41(~$0.0049)/kWh), Gujarat ₹0.12(~$0.0014)/kWh), Haryana ₹0.12(~$0.0014)/kWh), Daman &amp; Diu ₹0.05 (~$0.00060)/kWh), and Punjab ₹0.05 (~$0.00060)/kWh). Tripura broke even.</p>
<p>Andaman &amp; Nicobar had the highest ACS-ARR gap at ₹23(~$0.28)/kWh). Lakshadweep had an ACS-ARR gap of ₹19.44 (~$0.23)/kWh), Mizoram ₹6.08 (~$0.073)/kWh), Arunachal Pradesh ₹4.97 (~$0.060)/kWh), and Tamil Nadu ₹2.04 (~$0.025)/kWh).</p>
<p><strong>Cost and Revenue Structure</strong></p>
<p>The average Cost of Power (including own generation) for DISCOMs decreased from ₹4.73 (~$0.057)/kWh in FY20 to ₹4.69 (~$0.056)/kWh in FY21. Interest and finance charges increased from ₹0.42 (~$0.0051)/kWh to ₹0.45 (~$0.0054)/kWh. Revenue from operations decreased from ₹4.38 (~$0.053)/kWh to ₹4.21 (~$0.051)/kWh. Tariff subsidy received decreased from ₹0.93 (~$0.011)/kWh to ₹0.91 (~$0.011)/kWh.</p>
<p>Equity, accumulated losses, and net worth equity (including share application money pending allotment) increased to ₹3.33 trillion (~$40.27 billion) in FY21 from ₹3.23 trillion (~$39.06 billion) in FY20. Accumulated losses of distribution utilities is ₹5.16 trillion (~$62.38 billion). The combined net worth of DISCOMs is negative at 441.16 billion (~$5.37 billion).</p>
<p>Last December, the Ministry of Power said that 39 out of 55 electricity DISCOMs had <a href="https://mercomindia.com/discoms-submit-draft-proposals/" target="_blank" rel="noopener">submitted</a> draft proposals under the ₹3.03 trillion (~$40.82 billion) reforms-based result-linked power distribution program. The program aimed to improve the operational efficiencies and financial sustainability of DISCOMs by providing financial assistance to modernize and strengthen distribution infrastructure. The program also sought to improve the reliability and quality of supply to end consumers.</p>
<p><strong>Total Borrowings</strong></p>
<p>Total borrowings increased from ₹5.05 trillion (~$61.05 billion) in FY20 to ₹5.86 trillion (~$70.85 billion) in FY21. State government loans as a percentage of total borrowings decreased from 15.05% in FY20 to 11.57%. This is due to the conversion of loans taken over by state governments under UDAY into grants and equity by some states.</p>
<p><strong>Receivables for the sale of power</strong></p>
<p>Receivables for the sale of power for DISCOMs increased from ₹2.15 trillion (~$26 billion) in FY20 to ₹2.38 trillion (~$28.77 billion) in FY21. Receivables for the sale of power increased from 140 days of sale to 161 days.</p>
<p><strong>Payables for the purchase of power</strong></p>
<p>Payables for purchasing power for DISCOMs increased from ₹2.56 trillion (~$30.95 billion) in FY20 to ₹2.73 trillion (~$33.01 billion) in FY21. Payables for purchasing power increased from 164 days of sale to 176 days.</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/arjun-joshi/" class="vcard author" rel="author"><span class="fn">Arjun Joshi</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/Arjun-Joshi-1.png" width="50" /></p>
<p><strong style="text-decoration: underline">Arjun Joshi,</strong> Staff reporter at Mercom India<br />
<a href="https://mercomindia.com/author/arjun-joshi/" target="_blank" rel="noopener">More articles from Arjun Joshi.</a></p>
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<p><img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/04/Arjun-Joshi-1.png" width="86" height="102" /><a href="https://mercomindia.com/author/arjun-joshi/" target="_blank" rel="noopener"><strong style="color: #00b451">Arjun Joshi</strong> </a>is a staff reporter at Mercom India. Before joining Mercom, he worked as a technical writer for enterprise resource software companies based in India and abroad. He holds a bachelor’s degree in Journalism, Psychology, and Optional English from Garden City University, Bangalore. <a href="https://mercomindia.com/author/arjun-joshi" target="_blank" rel="noopener">More articles from Arjun Joshi.</a></p>
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Gap Between DISCOMs’ Cost of Supply and Revenue Increases to ₹0.95/kWh in FY21

25 State Power Utilities Downgraded in Annual DISCOM Ratings

<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>
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Five More States Become Eligible for Power Sector’s Reform-Linked Borrowings

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