Power sector: Nagaland’s aggregate loss at 40%

Our Reporter
Dimapur, Oct. 17 (EMN): Nagaland’s aggregate technical and commercial (AT&C) loss is at 40% against the 20% national average loss, a report by Niti Aayog has revealed.

Utilities in the Union territory of Jammu and Kashmir (J&K) reported the highest losses among power distribution entities in India, while some in the east and the northeast also incurred high losses, underscoring the lack of power sector reforms in these markets.

The report — Turning around the power distribution sector: Learnings and best practices from reforms – also revealed that the highest AT&C losses were by Arunachal Pradesh at 55% followed by Jammu and Kashmir at 50%.

The Average Cost of Service (ACS) and Average Revenue Realisation (ARR) gap was the highest in Nagaland ( INR 5.62 per unit), followed by Arunachal Pradesh ( INR 4.92 per unit), J&K (INR 1.85 per unit), Meghalaya ( INR 1.80 per unit) and Tamil Nadu (INR 1.27 per unit).

Fundamental to discoms’(power distribution company) profitability are the activities of metering, billing, and collection. 

“On the whole, continuous improvement in billing and collection efficiency has gradually helped in reducing AT&C losses across the country. The overall AT&C loss has come down to 22%. However, when compared at the global level, losses are still high, and much is to be done. Even within the country, there is a sharp difference in performance between states,” it read.

It was observed that the losses of the discoms declined from a peak of INR 76,878 crore in 2011–12 to INR 33,596 crore in 2017–18. However, losses increased sharply in 2018–19. The Covid-19 pandemic and the subsequent lockdown further damaged the discoms’ finances. Due to its adverse impact, the electricity demand of commercial and industrial (C&I) customers also suffered. It is projected that the total loss could rise to INR 75,000 crore in FY 2022, it stated.

The report stated that challenges clouding the discoms were manifold and involved the whole value chain.

‘Cost optimisation continues to be difficult to achieve due to factors such as legacy Power Purchase Agreements (PPAs) and poor investment in distribution infrastructure.

At the revenue realisation end, underinvestment and line losses, as well as challenges related to billing, metering, and collection, stands out. These elements are aggregated under the larger structural challenges including governance and regulation. They emphasise the need to revamp the underlying sectoral and organisational functioning,’ it said.

 The key challenges faced by discoms across the country are operational performance, subsidy dependence, outstanding dues, and role of taxes and impact of Covid-19.

Subsidy dependence

Operational and financial positions of discoms in Nagaland for 2018–19 showed that the AT&C losses was at 40.1% making the state third after Arunachal Pradesh at 55.5% and Jammu and Kashmir at 49.9%.

It stated that the billing efficiency was at 75%, while collection efficiency at 79.92% — the lowest in India.

Average Power Purchase Cost (APPC) was INR 5.45 crore; average cost of supply was at INR 12.98 Crore; revenue from sales was INR 2.52 Crore the lowest in the country; and tariff subsidy received was INR 4.81 Crore the highest in the country.

It said that regional variability emerged even while analysing the sector’s subsidy dependence. For example, discoms in the north-eastern states and agrarian states were especially dependent on government subsidies.

“Apart from straining a state’s finances, continued reliance on subsidies disincentivises discoms from making serious structural improvements. Delays in receiving subsidy reimbursements from the government add to the liquidity stresses of discoms,” it added.