How the Covid 19 has affected the financial performance of DIscoms?

The COVID-19 pandemic has caused a severe impact on the global economy, and the power sector in India is no exception. The pandemic has further distressed discoms or the distribution companies that are responsible for supplying electricity to consumers. The lockdown during the pandemic resulted in a sharp downturn in demand from high-paying commercial and industrial (C&I) customers, negatively impacting the discoms’ finances. The decline in sales to C&I consumers has increased the subsidy dependence of discoms, which is expected to rise to one trillion rupees in 2020-21 due to the revenue gap.

The pandemic has accelerated the outstanding dues of discoms, which reached ₹ 1.39 lakh crore as of October 2020, breaching the pre-UDAY (Ujwal DISCOM Assurance Yojana) peak of ₹ 1.3 lakh crore in 2015. The dues to power generators increased by 34.4 percent year-on-year to more than one trillion rupees as of October 2020. This increase in outstanding dues has led to a severe liquidity crisis for discoms.

To address this liquidity crisis, the central government announced a discom sector liquidity infusion scheme of ₹90,000 crore in May 2020, which was later enhanced further. The liquidity infusion has helped the discoms with immediate debt repayments and payments to power generators. However, this has also resulted in a significant increase in the gross debt level for state-owned discoms, which may reach as high as ₹6 lakh crore in FY 2022.

Such high levels of debt are not sustainable, and it is imperative to improve the operational efficiencies of discoms and reduce the gap between the tariff and cost of supply. The government has taken several measures to improve the financial situation of discoms, such as implementing the Ujwal DISCOM Assurance Yojana (UDAY) scheme, which aims to improve the operational and financial efficiency of discoms.

In conclusion, the COVID-19 pandemic has worsened the already troubled financial situation of discoms in India. While the government has taken steps to address the liquidity crisis, improving the operational efficiencies of discoms and reducing the gap between the tariff and cost of supply are crucial to ensure the financial sustainability of discoms in the long run. The power sector’s financial stability is essential to ensure uninterrupted and reliable power supply to consumers and the overall economic growth of the country.