Discoms’ Revenues to Fall 13.1% With Decline in Power Demand: Report

According to a new report, power demand is expected to decline by around 8% in current fiscal and is likely to result in a 13.1 percent YoY decline in revenues of Discoms.

Power demand is expected to decline by around 8 percent in current fiscal due to the steep fall in demand from commercial and industrial (C&I) segments on the back of COVID-19 pandemic-induced nationwide lockdown, Emkay Global Financial Services said in a report. According to the agency, the fall in demand is likely to result in a 13.1 percent year-on-year (YoY) decline in revenues of Discoms (distribution companies) to Rs 6.8 lakh crore in FY2021.

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The nationwide lockdown to contain the spread of the coronavirus during the first three months of the fiscal has significantly impacted economic activity, leading to a 17 percent fall in Q1FY21 power demand, it said.

“Our analysis reveals that power demand will decline 8 percent year on year in FY21 on a steep fall in the commercial and industrial (C&I) demand,” the agency said.

Further, the gap between the average cost of supply and average revenue realised in FY21 is expected to increase to Rs 0.95 per unit from Rs 0.50 per unit in FY2020, translating to an under-recovery of Rs 1.12 lakh crore.

According to the report, Discoms’ overdue has reached Rs 1.17 lakh crore, which is close to the peak level witnessed pre-UDAY.

Discoms‘ financial stress has been aggravated in this period due to the fall in power demand from the commercial and industrial segments and waiver of fixed charges by many discoms to the industrial segment. The overdue level is likely to remain high in FY21 due to the expected rise in under-recovery and slow progress in the Aatmanirbhar scheme toward loan disbursement,” it said.

The government had announced a Rs 90,000 crore credit line for Discoms earlier in the lockdown to clear outstanding dues to generation and transmission companies. However, Discoms’ outstanding dues have since increased to Rs 1.26 lakh crore as of May 2020 as against Rs 95,000 crore in March 2020. And the credit line which was to be disbursed by PFC and REC is yet to get rolling.

“We expect demand from C&I to decline 26.9 percent in FY2021, leading to a cross-subsidy charge loss of Rs 32,200 crore to the discoms,” it said. It further noted that power capacity addition will witness postponement in FY2021.

“We expect net capacity addition of 61 GW in FY20-FY24E. Key reforms such as ADITYA (Atal Distribution System Improvement Yojana) and Amended Electricity Act should improve discoms’ operational and financial efficiencies, if executed well,” it said.

However, it expects power demand to revive in FY2022, with improvement in economic activity.

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Ayush Verma

Ayush is a staff writer at saurenergy.com and writes on renewable energy with a special focus on solar and wind. Prior to this, as an engineering graduate trying to find his niche in the energy journalism segment, he worked as a correspondent for iamrenew.com.