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Discoms owe $3 billion dues to RE producers as of June 2022: IEA

Emphasising that the poor financial health of Discoms adversely impacts renewable energy (RE) expansion in India, the International Energy Agency (IEA) said that outstanding dues of renewable power producers stands at around $3 billion as of June 2022.

As per the Power Ministry data, cumulatively Discoms owed renewable power producers around ₹22,462 crore as on July 12, 2022. “The poor financial health of India’s Discoms continues to prevent faster renewable capacity deployment. The number of overdue payments to renewable power producers continues to grow, worth almost $3 billion in June 2022 — an increase of nearly 60 per cent since January 2021,” the Renewables 2022 report revealed.

Fear of revenue loss

According to the Ministry’s latest annual financial performance report, the share of energy supplied by the lowest-rated Discoms increased from 32 per cent in FY2020 to 70 per cent in FY21, it added. “While Discoms’ payment delays negatively affect developers’ profits and increase project risks, Discoms are also often reluctant to support rooftop PV deployment in their grids because they fear losing revenue from energy sales. Although they are obligated to fulfil their renewable purchase obligations and increase RE procurement, they often lack the financial capacity to sign new PPAs with auction winners, resulting in project commissioning delays,” the report pointed out.

ICRA in a January 2022 report said the overall dues to RE independent power producers (IPPs) from Discoms in the eight key States have gone up by 43 per cent to ₹19,400 crore as of December 2021 from ₹13,600 crore as of July 2021. “The can be attributed to the continued delays by Discoms in Andhra Pradesh amid the tariff issue and a large increase in dues from Karnataka, Maharashtra, Madhya Pradesh and Telangana amid the liquidity stress faced by Discoms in these States arising from inadequate tariffs and operating inefficiencies,” it added.

Enhancing capability

The IEA suggested that enhancing the capability of Discoms to procure more RE will be crucial to achieve faster growth.

To this end, improving the financial performance of Discoms and increasing penalties for non-compliance with renewable purchase obligations should limit delays in signing PPAs with auction winners, making developers and investors more willing to undertake new utility-scale projects, it recommended.

Another suggestion was to offer Discoms financial and regulatory incentives to increase rooftop PV deployment in their grids, which will also encourage them to attract tens of millions of potential prosumers by facilitating investment, thereby tripling main-case distributed PV deployment for 2022-2027.

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