New Delhi: Union power secretary Ajay Bhalla has said state distribution companies cannot be blamed for rising debt and dues. These discoms have improved their operational efficiency, but state regulators in some cases have not allowed electricity tariffs to keep pace with inputs costs, he told ET in an interview.

Bhalla’s comment is at odds with the near-unanimous view that state distribution companies are responsible for their financial mess.

As mounting debt and overdues of distribution utilities are drawing criticism to the Centre’s discom revival plan Ujwal Discom Assurance Yojana (Uday), Bhalla supported the scheme. “We can't discount Uday just like that.” 

He said Uday helped discoms improve their billing efficiency to about 85% and collection efficiency to about 97%, while the aggregate technical and commercial losses are below 19%. “If we look at gap between average cost of supply and revenue recovery, we have reduced it from 59 paise in the beginning of Uday to 17 paise in FY18”, Bhalla said.

In a report last week, credit rating agency Crisil said the combined external debt of state electricity distribution companies is set to rise to pre-Uday levels of Rs 2.6 lakh crore by March next year, from Rs 2.28 lakh crore in March 2019 and Rs 1.85 lakh crore in March 2018. The discom debt was at Rs 2.75 lakh crore in September 2015 and fell to Rs 1.94 lakh crore in March 2016 after Uday.

Association of Power Producers director general Ashok Khurana said Uday did not achieve the desired results on operational side and ended more like a financial engineering exercise. Bhalla, however, said debt position is not as bad as is being projected and discoms have managed operations with lesser debt. Out of the total Rs 3.52 lakh crore debt discoms have now, Rs 1.5 lakh crore are fresh loans, he said.

The debt also includes nearly Rs 1 lakh crore loans of the power utility of Tamil Nadu that has not yet separated its discoms and generation units, and another Rs 85,000 crore, which are being serviced by states but still reflect in the books of distribution companies, he said. The balance debt includes part of 25% of pre-Uday debt as states took over 75%.

“The inputs costs of coal and freight have gone up. There has to be a corresponding increase in tariff also,” Bhalla said. “Petitions are getting filed regularly by most states barring a few. Had these been filed and the normal tariff increases would have taken place, then these problems wouldn't have been there.”