How RBI can be used to fix state-run power distribution companies

State-run power distribution companies (SEBs or discoms) are among the country’s errant and pampered entities. They are bailed out time and again as they fritter away precious taxpayer money; discom losses in 2018-19 jumped 83%, to Rs 61,360 crore—a level seen in the pre-UDAY days. The generous UDAY scheme of November 2015 allowed 75% of the discom debt, of about Rs 2 lakh crore, to be converted into state government bonds with banks taking a hit. But, none of the efficiency targets that accompanied the financial concessions has been achieved. Aggregate technical and commercial (AT&C) losses were at an elevated 22% in March 2019, only slightly lower than the 23.9% in 2015-16, although these were to be brought down to 15%. Again, the ACS-ARR gap was to be eliminated, but it remains at Rs 0.52/unit, with Andhra Pradesh reporting a gap of Rs 2.67 /unit for 2018-19.

Not only have discoms stayed operationally inefficient, their billing systems remain weak, and the state governments are reluctant to raise tariffs; electricity used by farmers—a large vote bank—is hugely subsidised, but the discoms are rarely compensated on time. State governments remain complacent in the knowledge they will always be bailed out, else the lenders, to whom they owe a staggering Rs 4.8 lakh crore, will be in big trouble.

financial express
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