States come on board for discom revival plan

Five key states that account for the bulk of power dues have agreed to liquidate about ₹90,000 crore in outstanding payments and subsidy liabilities of their cash-strapped electricity distribution companies that are on the verge of collapse.

They will also assume nearly ₹45,000 crore losses of these distribution utilities under a central scheme to address power sector stress, sources told ET.

These states - Uttar Pradesh, Rajasthan, Andhra Pradesh, Telangana and Tamil Nadu - constitute nearly 65% of the overdue payments to power projects, accounting for the bulk of the stress in the sector.

Discussions for a similar revival roadmap are also going on with many other states that have agreed to take part in the Centre's result-oriented revamped distribution sector scheme (RDSS).

"If fully implemented by states, it is very positive for the sector. This will help ease the stress in the sector to a large extent," said Ashok Khurana, director general of Association of Power Producers. "We hope that after liquidation of past dues, these states will ensure regular payment of subsidy, state departmental dues and power bills."

These five states have submitted their cabinet-approved revival measures that include tariff revisions among others. This would be the first tariff revision in nearly six years in some of these states.

Soaring Electricity Demand

The measures would ensure payments to distribution companies amid soaring electricity demand that has forced states like Maharashtra and Andhra Pradesh to issue official orders on load shedding and power holidays.

"Most states have agreed to take over financial losses of their distribution companies either partially or fully under the RDSS or the scheme for availing additional borrowing space of 0.50% of GSDP in the coming years," said a senior government official. "All states plan to liquidate 100% of the government department dues by FY25."

Most of the state-owned distribution companies are cash-starved and many banks are not ready to lend to them given their dire financial condition.

The checks under the RDSS scheme would push the power distribution companies (discoms) to ensure adherence to agreed timelines and liquidation strategy.

"In case they are unable to comply and meet the set-out milestones, they would not be eligible for availing any additional borrowing space starting from FY23," the official said. Tamil Nadu has committed 100% discom losses takeover from FY22 till FY25 and as per the agreed roadmap with the Centre, the state is expected to file for tariff revisions for the first time in six years.

It also plans to encash outstanding power bills of Rs 2,702 crore from various government departments. The distribution utilities of Uttar Pradesh have committed to liquidating 40% of Rs 20,940 crore outstanding subsidy dues by FY25 and paying government department electricity bills of Rs 10,347 crore.

Rajasthan distribution utilities have outstanding subsidy dues of Rs 17,459 crore and outstanding government department bills of Rs 1,832 crore.

The state targets to liquidate 80% of subsidy dues by FY25 and 100% by FY26. Electricity distribution companies of Andhra Pradesh plan to liquidate 100% of Rs 13,880 crore payable subsidy dues and Rs 8,307 crore dues by FY25.

Telangana power distribution companies have Rs 14,442 crore receivables from various state government departments.

While Telangana has no plan for a discom loss takeover, Andhra Pradesh, Uttar Pradesh, and Rajasthan have agreed to take over 60% of FY22 losses in FY23. Similarly, 75% of losses for FY23 will be taken over in FY24 and 90% of FY24 in FY25, according to the plan submitted.

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