Discoms, states outstanding dues to GENCOs mount to Rs 1.6 Lakh cr in January; Power Ministry raises concern, calls for financial discipline

The Meeting of Parliamentary Consultative Committee attached to the Ministry of Power was held in New Delhi on Thursday over surmounting dues of GENCOs and brining in required financial discipline in DISCOM and States.  

Union Minister for Power and MNRE R.K Singh chaired the meeting. MoS for Power & Heavy Industries Krishan Pal Gurjar was also present in the meeting along with MPs of various political parties.  

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In the meeting, it was informed that Power sector is one of the most important drivers for economic growth and socio-economic development of a nation. The Government has brought about a transformational change in the power sector over the past few years.   

With total installed generation capacity of 394 GW, including renewable energy capacity of 104 GW as of today, our country has transformed from a Power deficit to a Power surplus country. Adequate transmission network has been created with enhanced inter-regional transfer capacity of over 1 Lakh MW and connecting the entire country into one integrated grid running on one frequency.  

The country achieved 100% village electrification and universal electricity access to all the households with significant improvement in availability of Power supply in both rural and urban areas. The availability of Power in rural areas which was about 12.5 hours in 2015 has gone up to 22.5 hours and in the urban areas it has gone up to 23.36 hours.  

Power Distribution remains the most critical link in the power sector value chain. It generates cash that feeds to the entire value chain right up to power generation and fuel supply. The impact of any inefficiency or financial management within power distribution flows to all upstream players in the value chain which adversely affects their operations and financial viability.   

One of the cases in point is mounting Genco dues DISCOMs - it is at an alarming level of Rs. 98,722 Cr as on 31.01.2022 for Central Generating stations, IPPs and RE Generators put together. If the dues of State GENCO (Rs. 63,000 crores) are also included, the total outstanding dues of GENCOs would be Rs. 1.6 Lakh crores. In this context, it is important to assess the measures and remedies being undertaken.  

A presentation was given by Ministry of Power to inform the MPs regarding various remedies and measures being undertaken to address dues of GENCOs and required financial discipline in DISCOMs and States are as follows:  

- The Govt has initiated multiple initiatives to address the issue of surmounting GENCO dues and worsening financial performance of DISCOMs. These initiatives have been designed to tackle financial and operational issues like high AT&C Losses, high ACS_ARR gap, inadequate corporate governance, poor liquidity, lack of consumer-focused approach etc. to bring in desired financial discipline in DISCOMs and State Government.  

- LC Based Payment Security Mechanism: The Ministry of Power has issued an order on June 28, 2019 regarding opening and maintaining od adequate Letter of Credit (LC) as a payment security mechanism under Power Purchase Agreements (PPAs) by DISCOMs. The order mandates National Load Dispatch Center (NLDC) and regional Load Dispatch Centers (RLDC) to dispatch power only after it is intimated by GENCO and DISCOM that a Letter of Credit for the desired quantum of power has been opened and copies made available to the concerned GENCO. 

- PRAAPTI Portal for Monitoring of GENCO Dues: The Ministry of Power (through PFC) has launched a web-portal called PRAAPTI (Payment Ratification and Analysis in Power procurement for bringing transparency in invoicing of generators) for transparency in monitoring of GENCOs dues at the national level. The portal was launched in 2018 and provides updated monthly information to all stakeholders regarding power purchase dues of DISCOMs towards Central Generation Stations, IPPs and RE providers. The PRAAPTI portal is immensely helpful for all stakeholders and also for monitoring performance on DISCOMs under Additional Borrowing Scheme, RDSS etc. 

 - Revamped Distribution Sector Scheme (RDSS): The Govt has launched the Revamped Distribution Sector Scheme (RDSS) to help DISCOMs improve their operational efficiencies and financial sustainability by providing result linked financial assistance to DISCOMs to strengthen supply infrastructure based on meeting prequalifying criteria and achieving basic minimum benchmarks.   

The main objectives of RDSS are:  

- Reduction of AT&C losses to pan-India levels of 12-15% by 2024-25  

- Reduction of ACS-ARR gap to zero by 2024-25.  

- Improvement in the quality, reliability and affordability of power supply to consumers through a financially sustainable and operationally efficient distribution sector.  

- The scheme is comprised of two components – Part A: Financial support for Prepaid Smart Metering and System Metering and Up-gradation of Distribution Infrastructure; and   

Part B: Training and capacity building and other enabling supporting activities.  

Through this scheme States/DISCOMs would be able to access funds for addressing infrastructure constraints in their distribution system as well as for its further augmentation/strengthening. This scheme provide for installation of prepaid smart meters with two-way communication features for over 25 crore electricity connections under TOTEX mode which will help in reducing AT&C losses and facilitating automatic measurement of energy flows and enable energy accounting and auditing without any human intervention.  

PM-KUSUM (Pradhan Mantri Kisan Urja Suraksha evam Uttthaan Mahabhiyan) Scheme: PM-KUSUM Scheme was launched in 2019 with an aim to provide energy security to consumers. This scheme provides performance-based incentives/funding support to promote installation of decentralized solar energy installations for provision of electricity to Agriculture Pump-sets. Under this scheme, Central Finance Assistance (CFA) up to 30% is provided and balance 70% can be mobilized as loan through FIs/Banks/NABARD.  

Additional Borrowing Scheme: In line with recommendations of the Fifteenth Finance Commission, Ministry of Finance (GOI) has launched a program in June 2021 to allow additional borrowing space to State Governments, which is conditional on them undertaking and sustaining specific reforms in the power sector. The additional borrowing limit permitted for power sector reforms is 0.5% of the Gross State Domestic Product (GSDP) of the respective state. It is expected that the Scheme would help improve financial performance of DISCOMs which will enable them to settle outstanding liabilities including GENCO dues. 

As per guidelines issued, the states’ eligibility would be determined through evaluation across three components:  

Entry level eligibility conditions – To be fulfilled for becoming eligible for performance evaluation; 

Performance evaluation criteria – Marking scheme; 

Bonus Marks criteria;   

Revised Additional Prudential Norms for Working Capital Loan to DICOMs/TRANSCOs/GENCOs: At the insistence of the Ministry of Power, the Power Sector NBFCs (PFC and REC) under its administrative control have introduced additional prudential guidelines for sanctioning of working capital loans to DISCOMs/TRANSCOs/GENCOs. These essentially entail those loans to DISCOMs and other State owned utilities would be contingent to their performance against prescribed conditions. The prudential norms for DISCOMs include – timely availability of audited annual accounts; timely filling of tariff petitions; timely issuance of tariff orders; determination of full cost tariff by SERCs; timely release of subside by State Governments; adherence to working capital norm as a percentage of revenue; outstanding Govt. Department electricity bills; AT&C trajectory and ACS-ARR gap as prescribed by MOP/GOI scheme; no default to any FI/ bank; preparation of quarterly accounts.  

Corporate Governance Guidelines: ‘Guidelines for Corporate Governance of State Power Distribution Utilities (DISCOMs)’ has been forwarded to States/UTs by Secretary (Power) on 11th March 2021, to enable mechanisms for performance improvement and accountability which provides a framework drawing from Companies Act 2013, DPE Guidelines, SEBI Regulations and best practices followed by private DISCOMs which will be an enabling mechanism for improving the performance and accountability in State Owned DISCOMs. It is anticipated that implementation of these Guidelines will result in better governance of the DISCOMs leading to overall improvement in their operational and financial performance.