Revenue gap for Discoms is very high this fiscal: ICRA

Rating agency ICRA has said that the revenue gap projected by State electricity distribution utilities across the country is significantly high for the fiscal 2016-17.

“The reasons for that include increase in cost of power procurement and other operations and maintenance expenses as well as higher than approved distribution losses for the distribution utilities in a few states,” ICRA’s note stated.

It added that the revenue gap from the previous periods is significant for distribution utilities in some States because of higher than approved power purchase expenses in the past.

“The aggregate revenue gap arising out of the tariff petitions field in 13 key States is estimated to be ₹ 73,300 crore, which is equivalent to 28 per cent of the net aggregate revenue estimate,” the note said.

While seven of the 13 States have proposed recovery in the revenue gap through a mix of tariff revision and subsidy support, the rest have left the treatment of revenue gap to the electricity regulatory commissions in the States.

“Given that State governments in most of these States have agreed in principle to implement the Ujjwal Discom Assurance Yojana, ICRA notes that debt takeover by respective state governments and other measures outlined in UDAY would favourably alter the estimated revenue requirement and revenue gaps for these utilities. However, this could lead to delays in the final tariff determination for 2016-17 by the State electricity regulatory commissions concerned,” ICRA’s note said.

ICRA also noted that the progress in filing of the tariff petitions by the electricity distribution utilities have been less than satisfactory. “What is of special concern is that distribution utilities in large states such as Maharashtra, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal are yet to file tariff petitions for 2016-17,” the rating agency said.

Meanwhile, in a separate report, India Ratings raised concern over the negative bids submitted by gas-based power plants in the recently held electronic auctions to allocate regassified liquefied natural gas (R-LNG).

“The tariff being paid by the distribution utilities of ₹ 4.7 a unit is still higher than the cost at which they can buy short-term power from the exchanges, thus the willingness of the distribution utilities to sign power purchase agreements going forward remains to be see,” the report stated.

“Even assuming that most of the generators have signed power purchase agreements at ₹ 4.7 a unit, the net realisation would be ₹4.67 a unit on account of the negative bid,” the report added.