India’s Power Distribution Sector: An assessment of financial and operational sustainability

Abstract

The Indian power sector value chain can be broadly segmented into generation, transmission, and distribution sectors. At an all-India level, the total installed generation capacity was 3,56,100.19 MW as on March 31, 2019 (provisional). The peak load demand of 1,75,528 MW during FY 2018-19 was largely met, considering that the peak load supply shortfall was 1494 MW (0.8%).1 This indicates that power deficits on account of generation capacity shortfall, which plagued the sector till recently, have been addressed. In the next five years, the Central Electricity Authority (CEA) estimates that existing generation capacity, augmented by power projects to be commissioned during this period, will be adequate to meet the energy demand growth. In the transmission sector, India’s regional grids (Northern, Eastern, Western, North-Eastern, and Southern) are currently integrated into one national grid. By the end of the 12th plan period (2012-2017), India had total inter-regional transmission capacity to transfer nearly 75,050 MW. This is expected to increase to about 1,18,050 MW by the end of the 13th Plan (2017-2022) and will be adequate to meet the energy flow requirements across the regions within India. The distribution sector consists of Power Distribution Companies (Discoms) responsible for the supply and distribution of energy to the consumers (industry, commercial, agriculture, domestic etc.). This sector is the weakest link in terms of financial and operational sustainability. It is worth noting that the total outstanding dues of Discoms payable to generators/creditors as of February 2019 stood at an alarming level of Rs. 418.81 billion, as per data from 58 Discoms reported by 17 participating GENCOs (Generation Companies). This included the overdue amount of Rs. 267.56 billion > 60 days payable to the generators.