Lower contribution of C&I segment will constrain overall realisations for discoms
Lower contribution of C&I segment will constrain overall realisations for discoms

Discom losses to be 40 pc above pre-pandemic levels: Crisil

ANI | Updated: Aug 14, 2021 16:15 IST

Mumbai (Maharashtra) [India], Aug 14 (ANI): Cash losses of power distribution companies (discoms) will remain elevated at around Rs 46,000 crore this fiscal or 40 per cent higher than the Rs 33,000 crore seen in the pre-pandemic levels of fiscal 2020, Crisil Ratings has said.

This is because revenues will remain constrained as demand from high-paying, commercial and industrial (C&I) consumers have been lower than seen during pre-pandemic period, while tariff hikes have been inadequate.
Costs are also likely to surge primarily because of higher interest burden because of ballooning debt. A study of 34 state discoms (from 15 states) which account for over 80 per cent of India's power demand shows as much.

The nationwide lockdowns imposed in the first half of the last fiscal brought C&I activities to a standstill and evaporated an estimated quarter of demand from high-paying C&I consumers for the full fiscal 2021 as compared to fiscal 2020.

Ankit Hakhu, Director of Crisil Ratings, said while industrial demand will recover in fiscal 2022 with an expected recovery in industrial activity amid healthy GDP growth, forecast at 9.5 per cent on-year, commercial demand will remain subdued as people remain cautious in stepping out of their homes.
"Consequently, we expect C&I consumers to account for a lower 48 per cent of demand in fiscal 2022 compared with 51 per cent in fiscal 2020," he said.

Thus lower contribution of the C&I segment, which pays Rs 3 to 4 per unit more compared with agriculture and domestic consumers, will constrain overall realisations for the discoms.
That and tariff hikes by just 6 out of 15 state discoms analysed will translate to a mere 1 to 2 per cent increase in average realisations from fiscal 2020 levels, said Hakhu.

Operating costs may also inch up 3 per cent over fiscal 2020 because of higher power purchase cost driven by pricier coal, transportation and steady increase in the administrative costs. Diesel prices are up over 35 per cent from fiscal 2020 levels.

Consequently, constrained realisations along with limited tariff hikes coupled with higher interest and operating costs is expected to expand discom losses yet again this fiscal -- by a good 40 per cent over fiscal 2020 levels. (ANI)