Coronavirus lockdown to hurt finances of generators, discoms: Study

The nationwide lockdown to contain the spread of Covid-19 pandemic is set to mCoronavirus lockdown to hurt finances of generators, discoms: Studyagnify the already stressed finances of electricity generators and distribution companies (discoms), a study said.

As a fall-out of the lockdown, the finances of the discoms are impacted since they are not able to collect payments from consumers and in turn pay to the generators.

“State governments would further delay the release of subsidies. Given that usually most of the payments for past supply are collected/made towards the end of the financial year (March), the delays would have significant financial implications. Although since August 2019, states have been making monthly payments to generators after the power ministry made it mandatory for discoms to maintain LC (letter of credit) as payment security for power purchases, there exists sizeable past dues that are to be cleared. Further, the fall in demand would impact revenues of generators and distributors alike”, a power update report by CARE Ratings noted.

The financial profile of the state distribution utilities or discoms has not seen an improvement in 2019-20. The transmission and distribution losses and the outstanding dues of discoms have not seen a reduction during the year. The inability of states to hike tariffs, rising operational expenditure, high levels of outstanding dues and delays in receipt of subsidy from states has weakened the financial position of state distribution utilities.

The AT&C (aggregate technical and commercial) loss of discoms at the all India level at 19.1 per cent is above the UDAY (Ujwal DISCOM Assurance Yojana) target of limiting the losses to 15 per cent by FY19.

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