The inability of India's discoms to pay for more expensive power

I read more widely around the ‘inability of discoms to pay for more expensive power’ as in the current scenario.

June 2019 article – Before the recent high prices of coal and gas arrived : The article asked : Why is India unable to provide 24x7 electricity despite building morepower stations?

Unless distribution companies pay their record debt, which would reach Rs 2.6 lakh crore by 2020, it won’t be possible to increase power generation.

At the root of the contradictions between almost-universal electrification, surplus electricity and the inability to supply it around-the-clock to Indian homes, is a debt that burdens state-owned electricity distribution companies nationwide, impairing their ability to build and maintain power grids and equipment.

The inability or refusal of state governments to increase power bills, has led to more borrowing and power shortages and made distribution companies reluctant to buy available electricity, which means continuing blackouts and erratic power supply.

India currently has around 356 gigawatts of installed generation capacity against a peak demand of about 177 gigawatts.

The nub of the issue: power generation cannot be increased unless distribution companies pay their dues.

The distribution company debt of Rs 2.6 lakh crore (dated to 2020) would be more than the Centre’s combined 2017-’18 spending on: highways, national railways, metro-rail systems, national food subsidies, cash transfers for national social-security schemes or direct benefit transfers, cooking-gas subsidies and capital expenditure for the defence services, space technology applications and satellites.

The accumulated losses of dicoms, and efforts to do something about it, have a long history.

In 2015, India’s distribution companies collectively recovered less than 80% of their operational costs. On March 2015, they had accumulated losses of about Rs 4.3 lakh crore.

So, the companies borrowed money from banks, with interest rates as high as 14%-15%, to cover their costs, their cycle of losses cancelling out India’s other gains: more coal, more power plants, and more transmission lines

Under the UDAY scheme, the power ministry, state governments and distribution companies signed a memoranda of understanding that said state governments would take over 75% of the companies’ debts – outstanding as on September 2015 – through bonds with a maturity period of 10 years to 15 years.

The companies were given goals: reduce power and interest costs, monitor and reduce transmission losses and power theft and fix faulty meters. By charging more, distribution companies were to wipe out the difference between the cost of supply and average revenue by 2018-’19.

In 15 states that account for 85% of national aggregate technical and commercial losses, despite the debt takeover, the UDAY failed.

Distribution companies in three BJP-ruled states – Uttar Pradesh, Jharkhand and Maharashtra – were responsible for 87% of the outstanding amount not paid by consumers, said a May 20 study.

The Government’s electrification drive, begun in 2016, had some goals contradictory to the UDAY scheme. The electrification drive was meant to connect all the villages and households to the grid and to provide them with round-the-clock power.

The time-bound objectives [of electrification drives] and UDAY were converging and diverging on certain aspects, which resulted in a haywire situation for the implementation agencies, such as the distribution agencies.

The government electrified 26.30 million rural households to achieve 99.93% electrification over 16 months leading up to January 2019, a mammoth exercise whose implementation created problems for distribution companies: higher costs and reduced revenues from the newly connected households, mostly rural, paying low or no bills.

The blackouts continued primarily because the companies were reluctant to buy more power, either because they do not have the money or were afraid consumers will not pay.