Reports on DISCOMs incurring Rs 90,000 cr loss in FY2021 'grossly inflated': PowerMin

The Power Ministry has issued a clarification over media reports regarding DISCOMs incurring a loss of Rs 90,000 crore in FY2021, saying these figures are "grossly inflated". The ministry said the media reports were based on a report published by ratings agency ICRA on the power distribution sector in March 2021.

"While this report indicates Profit After Tax (PAT) figures of negative Rs 50,000 crore in FY19 (which is consistent with the PFC's Annual Utilities report of FY 2019), the projections of PAT figures of FY 2020 are shown to increase to the tune of negative Rs 60,000 crore. This report further builds on these losses and projects total DISCOM losses of Rs 90,000 crore in FY 2021. One of the reasons ascribed to this speculation is the decline in electricity volume sales in the year 2020-21 due to the COVID induced lockdown," the ministry said.

The media report also mentioned Rs 30,000 crore increase in DISCOM dues to its creditors from March 2020 to December 2020. "The report perhaps assumes this increase in payables, which is essentially a cash flow problem, to directly reflect into additional DISCOM losses in FY 2021 over the projections of FY2020," the statement said.

The ministry said the facts are contrary to these claims. It is discernible that the actual PAT figure for FY2020 is almost half of the negative Rs 60,000 crore projected by ICRA for FY2020, thereby indicating that ICRA's estimations of even FY2020 are significantly "flawed", the ministry said.

It said ICRA further built up the losses for FY2021 on "erroneously estimated figures" of FY2020 by adding another Rs 30,000 crore due to COVID for reasons mentioned above. "No details have been given in the report to cover this increase," it said.

The ministry said as per these erroneous figures, the loss figures of Rs 90,000 crore for FY2021 seem to be grossly inflated. "The media reports, relying on this misleading projected figures of DISCOM losses, do not take into cognizance the fact that under the current regulatory system of Electricity Tariff determination, a mechanism of True-up's already exists that would allow the recoveries of losses arising due to change in consumer category-wise consumption patterns coming with COVID induced lockdowns, to be covered through tariffs in the subsequent year."

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It said ICRA also alluded to this aspect in its report. The ministry said the government has been taking significant steps to improve the operational efficiencies and financial viability of DISCOMs.

It clarified that the adverse performance of DISCOMs across the country already seems to have gone past the inflexion point, and the DISCOMs are showing green shoots of turnaround. "The measures already taken by the government would further incentivise the DISCOMs to reform, perform, and transform in an efficient and cost effective manner."

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The Power Ministry said to tide over the liquidity problems of increasing DISCOM payables to power generation companies, arising out of the outbreak of COVID-19 lockdowns, the government has launched a Liquidity Infusion scheme.

The DISCOMs are already availing benefits tied to reforms under the scheme. The government has also incentivised the DISCOMs to transform, reform and perform by linking 0.5 per cent of the additional borrowings linked to power sector reforms from FY 2022 to FY 2024, it said.

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