DISCOMS: Farmers, residential households consuming up to 300 units, small traders, and small shop-owners, among others, were promised free power by parties such as the Aam Aadmi Party (AAP), Samajwadi Party (SP), Congress, Dravida Munnetra Kazhagam (DMK), and All India Anna Dravida Munnetra Kazhagham (AIADMK). Power has always drawn voters as a campaign promise; but, the dues that state governments owe power-producing firms (GENCOS) in order to keep these promises is a different issue.
How much do generating businesses owe state distribution companies (DISCOMS)?
The Centre announced in the just concluded Parliament session that state DISCOMs owe GENCOs about Rs 1,00,987 crores as of February 28, 2022. Maharashtra (Rs 19,282 crore), Tamil Nadu (Rs 19,658 crore), Rajasthan (Rs 10,852 crore), Uttar Pradesh (Rs 9,264 crore), and Telangana (Rs 9,264 crore) are the states with the largest dues, according to the list (Rs 6,891 cr).
With Rs 6,864 crore in debt, Jammu & Kashmir is next, followed by Punjab (Rs 1,326 crore) and Haryana (Rs 1,326 crore) (Rs 754). The states with the fewest outstanding debts are Chhattisgarh (Rs 120 crore), Odisha (Rs 250 crore), Gujarat (Rs 338 crore), and Kerala (Rs 482 crore), and West Bengal (Rs 482 crore) (Rs 536 cr). Nagaland owes no money, while Uttarakhand owes Rs 6 crore, Goa owes Rs 9 crore, Mizoram owes Rs 12 crore, and Manipur owes Rs 12 crore (Rs 45 cr).
This list solely includes the amounts owing by these states to central power plants, independent power producers (IPPs), and renewable energy (RE), excluding State GENCOs.
Why do states owe such a large amount of money in dues?
The following are the primary reasons why DISCOMS fail to pay their respective power generators’ dues:
Tariffs that do not represent costs: Electricity bills are computed depending on the number of units utilized by customers and the tariff slabs into which they fall, e.g. (below 100 units, 100-300 units, 300-500 units, commercial, etc).
Electricity duty, fuel surcharge, power purchase adjustment, and fee are all included in the bill. Electricity duty is a tax charged by the state government on the tariff slabs indicated above, whereas fuel surcharge is an additional fee assessed on the tariff slabs based on a rise in fuel prices over the course of the year.
The expense incurred by state DISCOMS to procure power from generating sources and distribute power to consumers at retail tariffs set by state Electricity Regulatory Commissions is referred to as power purchase adjustment. The majority of DISCOMs buy power for end-users from NTPC, other GENCOs, Transmission firms (TRANCOS), and Power Grid Corporation of India Limited (PGCIL). Surcharges, on the other hand, are additional charges imposed on customers in the event of late payments.
State governments are in charge of the four components stated above. States may reduce customs and levies to provide relief to end consumers on occasion. However, because GENCOS, TRANCOS, and PGCIL refuse to lower their rates, state governments are forced to absorb the increased costs, which often leads to debt.
Poor billing and collection efficiency: The Maharashtra government, which owes the most money, recently threatened to cut off power to agriculture water pumps to recover Rs 44,000 crore in dues that the state DISCOM — Maharashtra State Electricity Distribution Company Limited (MSEDCL) — was unable to recover. After political intervention and farmer objections, the government suspended the plan for three months. In Maharashtra alone, 64.52 lakh users have yet to pay their DISCOM dues.
State government departments not paying their electricity bills to DISCOMs
The state governments are frequently the main defaulters in DISCOMs. For example, India’s largest power supplier, NTPC, recently threatened to cut off supply to Uttar Pradesh Power Corporation Limited (UPPCL) if it did not pay dues totaling Rs 2,873 crores.
Similarly, government ministries in Andhra Pradesh owe about Rs Rs 10,800.47 crore as of May 31, 2021, including Panchayat Raj, Rural Development, Water Resources, and Municipal Administration and Urban Development. Unpaid bills from government offices, ministerial residences, and poor/outdated electrical meters account for the majority of these costs.
Non-payment/insufficient payment by the State Government in relation to the subsidies they have announced:
AAP has promised that if elected to power in Uttar Pradesh, Uttarakhand, Punjab, Goa, and Manipur, it will provide 300 units of free electricity, and waive previous electricity bills, provide free electricity to farmers, and supply electricity 24 hours a day, seven days a week. In Uttar Pradesh, too, SP president Akhilesh Yadav promised the same.
While the AAP has been chastised by various opposition parties for making similar “power promises,” Punjab, where it won power, already has the highest subsidies. It has almost Rs 9,000 crores in power subsidies to farmers, but it owes Rs 1326 crores to producing corporations.
The State DISCOM – Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) have the largest borrowings of Rs 1,24,423 crore in 2020 in Tamil Nadu, which also offers huge power subsidies. In contrast to the previous year, this was an increase of Rs 10,975 crores. Both the AIADMK and the DMK, which have held power in the state, have promised free solar power stoves, lower gasoline and diesel prices, and farm loan exemptions, all of which have put a strain on the state’s DISCOMs.