Marked Reduction in Aggregate Technical and Commercial losses of DISCOMs in FY22 – EQ Mag

Ministry of Power institutes number of measures to improve the performance of utilities

• Aggregate Technical and Commercial losses of DISCOMs decline significantly to ~17% in FY2022 from ~22% in FY2021
• Gap between Average Cost of Supply and Average Realizable Revenue declines from Rs. 0.69/kWh in FY2021 to Rs. 0.22/kWh in FY2022

Aggregate Technical and Commercial Loss (AT&C Loss) and ACS-ARR Gap are key indicators of DISCOM performance. In the last 2 years, the AT&C loss of the DISCOMs of the country was hovering at 21-22%. Ministry of Power instituted a number of measures to improve the performance of utilities. Preliminary analysis of data for FY2022 of 56 DISCOMs contributing to more than 96% of input energy, indicates that the AT&C losses of DISCOMs have declined significantly to ~17% in FY2022 from ~22% in FY2021.

Reduction in AT&C losses improves the finances of the utilities, which will enable them to better maintain the system and buy power as per requirements; benefitting the consumers. The reduction in AT&C losses has resulted in reduction in the Gap between Average Cost of Supply (ACS) and Average Realizable Revenue (ARR). The ACS-ARR Gap (on subsidy received basis, excluding Regulatory Income & UDAY Grant) has declined from Rs. 0.69/kWh in FY2021 to Rs. 0.22/kWh in FY2022.

The decline of 5% in AT&C losses and 47 paise in the ACS-ARR Gap in one year is the result of a number of initiatives taken by the Ministry of Power. On 04th September 2021, the Ministry of Power revised the prudential norms of PFC and REC, the lending agencies for the power sector to provide that loss making DISCOMs will not be able to avail financing from PFC and REC until and unless they draw up an action plan for reducing the losses within a specific timeframe and get their State Government’s commitment to it. The Ministry of Power also decided that any future assistance under any scheme for strengthening of the distribution system by the DISCOMs will be available to a DISCOM which is making losses only if it undertakes to bring its AT&C losses / ACS-ARR Gap down to specified levels within a specific timeframe and gets their State Government’s commitment to it. The Revamped Distribution Sector scheme lays down that funding under the scheme will be available only if the DISCOM commits to an agreed loss reduction trajectory. The Ministry of Power made a series of presentations before the 15th Finance Commission as a result of which 15th Finance Commission provided for an additional borrowing window to States contingent on their taking steps to reduce to their DISCOMs losses. The Ministry of Power issued Regulations on 07th October 2021 providing for mandatory energy accounting and energy auditing for all DISCOMs. On 03rd June 2022, the Ministry of Power issued Late Payment Surcharge Rules which provide that unless the Distribution companies promptly pay for the power drawn from the ISTS, their access to the power exchange will be cut off. While putting all these in place; the Ministry of Power also worked with the distribution companies to provide the necessary finances under the RDSS for undertaking the loss reduction measures.

The above improvement is a result of the concerted efforts of the Ministry of Power, the State Governments as well as Distribution companies to implement the reforms and adoption of best practices. As a result – the viability of the power system has improved. This was necessary because the demand for power has been growing and further investments will be necessary for the power sector to expand to meet the growing demand; and the investments will only come if the power sector remains viable.