Losses of power distribution companies will remain elevated at around ₹46,000 crore this fiscal, working out to 40 per cent higher than the ₹33,000 crore seen in the pre-pandemic levels of fiscal 2020.

The revenues have been constrained as demand from high-paying, commercial and industrial (C&I) consumers have been lower than seen during pre-pandemic period, while tariff hikes have been inadequate, according to a Crisil report.

In its assessment, costs are also likely to surge primarily because of higher interest burden because of ballooning debt according to a study of 34 State discoms (from 15 States), which account for over 80 per cent of India’s power demand.

Also read: Weak power demand, huge losses: Discoms’ debt may spike this fiscal

The nationwide lockdowns imposed in the first half of the last fiscal brought commercial and industrial activities to a standstill and evaporated an estimated quarter of demand from high paying consumers for the full fiscal 2021, compared to 2020.

Ankit Hakhu, Director, Crisil Ratings, in a statement said, “In fiscal 2022, while industrial demand will recover with an expected recovery in industrial activity amid healthy GDP growth, forecast at 9.5 per cent on-year, commercial demand will remain subdued as people remain cautious in stepping out of their homes. Consequently, we expect C&I consumers to account for a lower demand in fiscal 2022, compared with fiscal 2020.”

Thus lower contribution of the C&I segment, which pays ₹3-4 per unit more compared with agriculture and domestic consumers, will constrain overall realisations for the discoms. And tariff hikes by just 6 out of 15 State discoms analysed, would translate to a mere 1-2 per cent increase in average realisations from fiscal 2020 levels.

Operating cost

Operating costs may also inch up 3 per cent over fiscal 2020 because of higher power purchase cost driven by pricier coal, transportation and steady increase in the administrative costs. Diesel prices are up over 35 per cent from fiscal 2020 levels.

Aditya Jhaver, Director, Crisil Ratings, said, “Further, denting the cash flows will be a more than 30 per cent surge in interest cost as discoms take debt largely under Atmanirbhar Bharat Scheme, to repay older dues of generation and transmission companies. This is a higher cost debt with interest cost around 50-100 basis points higher than the average cost of debt of discoms. Debt will also be taken to fund ensuing cash losses and capital expenditure. We expect debt to surge to ₹5.3 lakh crore this fiscal.”

Consequently, constrained realisations along with limited tariff hikes coupled with higher interest and operating costs is expected to expand discom losses yet again this fiscal – by a good 40 per cent over fiscal 2020 levels.

Therefore, structural reforms are critical to their sustainability it said.

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