Energetica India Magazine: september 2020

34 energetica INDIA- September_2020 Discoms dues to gencos rise to near 5-year high The government’s plan to provide financing of Rs.900 bn under the Atmanirbhar scheme to the discoms should ease discoms’ pain and help them to repay most of the outstand - ing dues to the gencos. However, the implementation of the package has not been entirely smooth, and negotiations have led to a delay in execution as it comes with certain stipulations such as state governments meeting unconditional and irrevo - cable guarantees. • Power distribution companies (discoms) pending dues to power generation companies (gencos) rose 73% yoy (8% mom) to Rs.1.05tn as of April’20. Total outstanding stood at Rs.1.23tn (+52% yoy/+7% mom), close to its Nov’15 peak of Rs.1.35tn • Discoms in key states – Rajasthan, Tamil Nadu, Uttar Pradesh, Maharashtra, Karnataka, Telangana and Jharkhand – account for 81% of the total overdue owed to gencos • Discoms’ ailing financial health was exacerbated during the lockdown, leading to a steep fall in power off take across the commercial & industrial segment. Also, collection efficiency declined to 20% in April’20 and 35-40% in May’20 • While the government has provided a Rs.900bn relief pack - age under the Atmanirbhar scheme, its execution has been slower than anticipated • Of the total overdue to gencos, independent power pro - ducers (IPPs) have the highest share at 36.1%, followed by CPSEs (35.7%), state gencos (20.3%) and renewable energy (8%) • Among private gencos, Adani Power has the highest share in the total overdue at Rs.284bn (74% of IPPs overdue/27% of total overdue). Similarly, dues owed to NTPC are highest among CPSEs at Rs.223bn (59% of CPSEs/21% of total over - due) • Among all the discoms, Rajasthan discom has the highest share in the total overdue at Rs.312bn, which increased 46% yoy and 4% mom. Tamil Nadu discom comes second with the overdue amount of Rs.158bn, surging 63% yoy and 9% mom. Uttar Pradesh saw its outstanding dues balloon to Rs.140bn in April’20 – third highest – from Rs.55bn a year ago, up 155% yoy and 6% mom • Of the Rs.170bn total amount billed to discoms in April’20, only 11% or Rs.18bn was paid • Payments as a percentage of the billed amount for a month have historically been poor. However, payments particular - ly deteriorated in April’20, owing to lower collections due to Covid-19 woes (only 20-25% collection efficiency). Collec - tions were impacted in both urban and rural areas and have been extremely low (except on digital platforms, where col - lection efficiency was as high as 85-90%). The overall power demand in India fell 22% yoy in April’20 (-13% mom) , 14% yoy in May’20 (up 20% mom) and 14% yoy in June’20 (flat mom). Overall, power demand and gen - eration declined by 16.5% yoy and 20.4% yoy, respectively, in Q1 FY20. Going ahead, any recovery in power demand will hinge on recovering economic activity, which is contingent on the containment of Covid-19’s spread and a gradual easing of the lockdown. Atmanirbhar scheme moving at a slower pace With abysmal financial health of discoms, the entire chain is in deep stress. The government’s plan to provide financing of Rs.900bn under the Atmanirbhar scheme to the discoms should easethe pain and help them to repay most of the outstanding dues to the gencos. However, the implementa - tion of the package has not been entirely smooth, and ne - gotiations have led to adelay in execution as it comes with certain stipulations such as state governments meeting un - conditional and irrevocable guarantees. This has met with resistance from some states and they are reluctant to do so as they do not have the required fiscal bandwidth. To date, five states discoms have sought Rs.331bn under the Atman - irbhar Scheme – Tamil Nadu (Rs.155bn), Andhra Pradesh (Rs.66bn), Maharashtra (Rs.50bn), Rajasthan (Rs.45bn) and Punjab (Rs.20bn), out of which the total sanctioned amount so far is Rs.123bn (Rs.33bn for Andhra Pradesh, Rs.20bn for Punjab, Rs.20bn for Rajasthan and Rs.50bn for Maharash - tra). Even after the disbursement ofthese sanctioned amount is paid to the gencos, the total outstanding due of discoms would remain Rs.1.1tn, which is worrying. POWER SECTOR Report from Emkay Global Financial Services Ltd.