Lockdown Fallout- Discom Collections To Be Hit


The power purchase cost of the Discoms will be impacted as the Bill collections would take a hit due to the ongoing 21day-lockdown as per report by India Ratings (Ind-Ra).

The steep fall in the demand from industrial consumers; higher-than-expected aggregate technical and commercial (ATC) losses; higher dependence on direct collections from consumers compared to subsidy and inability to increase tariffs immediately, this would impact cash flow of discoms.

Subsequently, these discoms would either delay payments to the generating companies (gencos) or resort to higher borrowings, the report said.

Ind-Ra expects payments to gencos remain uneven even after June 2020, based on the collection ability of the discoms. The overall situation could result in leverage increasing across the sector because of an increase in working capital borrowings.

The expectation is that the lockdown due the pandemic could lead to the thermal plant load factor (PLF) falling below 55 per cent for FY2021, closer to the technical minimum standards, on account of a gradual ramp-up in industrial load and the already muted electricity demand witnessed in the pre-COVID scenario.

In its report Ind-Ra states that discoms are likely to defer the payments to the gencos during March-June 30, 2020, which would offer considerable relief to the former, given the sudden drop in power demand.

The power purchase cost, which accounts for 60-70 per cent of the revenue, is the largest cost for the discoms; hence, a deferment in the same would enhance their liquidity at a time when collections are dwindling, as most discoms do not have a large percentage of online collections.