Discoms AT&C losses down by 5% in a year: Power Ministry

New Delhi: The AT&C losses of discoms in India has witnessed a significant decline of five percent in just a year's time, indicating an improvement in the finances of the power distribution utilities, said the Ministry of Power on Monday. "Preliminary analysis of data for FY2022 of 56 DISCOMs contributing to more than 96 percent of input energy, indicates that the AT&C losses of DISCOMs have declined significantly to ~17 percent in FY2022 from ~22 percent in FY2021," said an official statement issued by the ministry.

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 percent. Over the last one year, the Ministry of Power has brought in a number of measures to improve the performance of discoms.

"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," said the ministry.

Discoms ACS-ARR gap declines by 47 paise

The reduction in AT&C losses has resulted in a reduction in the gap between the Average Cost of Supply (ACS) and Average Realisable 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.

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"The decline of 5 percent 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," said the ministry.

Financial viability of discoms

Detailing the steps taken by the government to improve financial viability in the power distribution sector, the Ministry of Power said that on September 4, 2021, the Ministry of Power had revised the prudential norms of state-run PFC and REC, the lending agencies for the power sector, to disable loss-making discoms from availing 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 had also decided that any future assistance under any scheme for strengthening of the distribution system by discoms will be available to a discom which is making losses only if it undertakes to bring its AT&C losses and 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 (RDSS) also 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 also made a series of presentations before the 15th Finance Commission as a result of which the commission provided for an additional borrowing window to states contingent on their taking steps to reduce their discoms' losses. The Ministry of Power issued Regulations on October 7, 2021, providing for mandatory energy accounting and energy auditing for all discoms. On June 3, 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 distribution companies to provide the necessary finances under the RDSS for undertaking loss-reduction measures.

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"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," said the Ministry of Power.

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