Revenue gap of discoms rises to 88,720 crore in June – Times of India

NEW DELHI: Regulatory assets – broadly, gap between procurement and supply costs booked as receivables – of distribution companies (discoms) have cumulatively risen to Rs 88,720 crore as of June 30, available government data show, underlining the fact that the financial woes of the utilities run deeper than their outstanding dues from state governments.
Industry players said it is just the tip of the iceberg as the government data logs only the amount recognised by state regulators. The actual amount could be in excess of Rs 1 lakh crore as claims for more are tied up in legal knots at the appellate level or in higher courts.
Rajasthan tops the list of states with highest regulatory assets of Rs 45,920 crore followed by West Bengal (Rs 19,580 crore), Tamil Nadu (Rs 10,336 crore), Delhi (Rs 8,954 crore), Kerala (Rs 5,472 crore) and Maharashtra (Rs 4,580 crroe).
Regulatory assets pass the present liability to future generations and could lead to tariff shocks. “The appellate tribunal had earlier ruled that regulatory assets must be recovered over three years. However, the magnitude of the assets could cause a major tariff shock,” a Niti Ayog-Rocky Mountain Institute report last year said.
Regulatory assets are generated when state regulators accept that tariffs do not cover a discom’s power procurement cost but do not raise rates to the desired level, mostly under pressure from state governments that appoint them. The revenue gap between the cost of procuring and supplying power, which widens due to systemic inefficiencies, is then classified as a regulatory asset.
These make discom books look good on paper. But in reality, as the Niti-RMI report said, “Regulatory assets create cash-flow problems for discoms, forcing them to borrow funds to cover the revenue deficit. The additional borrowing, coupled with the interest, adds to the burden of discoms”.
Consumers too pay the price as regulators often allow a surcharge to be levied in a bid to cover their failure to allow tariffs to reflect costs under political pressure. Delhi, for example, has 8% surcharge.
Essentially, regulatory assets are part of the “freebie culture” that prime minister Narendra Modi in July blamed for power sector ills. The freebies also include not paying subsidy amounts to discoms and unpaid bills of government bodies, which together amounted to Rs 1.39 lakh crore as of March 31, first reported by TOI on July 26.

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