Discom Dues to Power Generators Grew by 57% in July

The outstanding dues of distribution companies (Discoms) to power generating companies have risen by more than 57% to Rs 73,748 crore in July 2019 compared to the same month last year, according to the latest data by PRAAPTI portal.

Discoms owed a total of Rs 46,779 crore to power generation companies in July 2018.

In May 2018, the power ministry launched PRAAPTI (Payment Ratification And Analysis in Power procurement for bringing Transparency in Invoicing of generators) web portal and an App as well, to monitor power purchase transactions between generators and Discoms.

In July this year, total overdue amount, which was not cleared even after 60 days of grace period offered by generators, stood at Rs 54,342 crore as against Rs 30,331 crore in the same month in 2018. As per present norms, generating companies give 60 days time to Discoms for bill payments. If not paid, the outstanding becomes overdue and generators charge penal interest on that amount in most of the cases.

Furthermore, the data indicates that the outstanding dues and overdues increased by 5.4% and 5% over the preceding month.

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While the exact reasons for distress in Discoms is yet to be ascertained, the Financial Express in May this year, citing an internal power ministry note, reported that the Discoms including Ujjwal Discom Assurance Yojana (UDAY) Discoms were facing trouble mainly due to rise in power purchase and establishment costs, low collection from remotely located consumers, inadequate tariff hikes, unpaid dues by government departments and slow subsidy disbursements by states.

These figures clearly indicate a brewing stress in the power sector, but the distress is much bigger.

According to a recent report by Central Electricity Authority (CEA), Discoms are not meeting payment obligations to renewable energy producers. Discoms owe nearly Rs 7,000 crore to renewable energy producers till August 2019.

On the other side, electricity demand is on the rise but unevenly across states, CEA data shows. From April to July, there has been a 7% growth in India’s electricity demand. But, the states which are hubs for automobile sector such as Tamil Nadu and Maharashtra have seen a minimal demand rise at 2.7% and 1.4%, respectively, due to the ongoing slowdown in the automobile sector whereas states such as Uttar Pradesh (9%) and Rajasthan (11%) have reported record growth during the four month period. The states where demand increased indicate a rise in household consumers.

In June, the Power Ministry, through an order had made it mandatory for Discoms to open and maintain adequate letters of credits from August 2019, as a payment security mechanism with power generating companies under power purchasing agreement. Accordingly, Discoms began invoking letter of credit if they have overdues to the power generating companies.