The electricity distribution sector did make some progress last year (FY20) despite being hit by the pandemic. It bled Rs218 billion in lieu of T&D and recovery losses, continuing with decades old rich tradition. The loss was bettered by Rs8 billion from last year. The distribution companies’ collective transmission and distribution (T&D) losses have stood like a rock in all times – good and bad – holding on at 18 percent in the last five years. Give some marks for being consistent(ly bad).
The latest Performance Evaluation Report released by the regulator confirms that status quo has not changed at the discos level, even if is claimed to have changed at the government level. If the T&D losses have refused to budge in the last five years, Nepra has reciprocated the favor by being super consistent in terms of allowances for the same. If Nepra was allowing 15.2 percent for tariff purposed at a loss of 17.9 percent back in FY16, it allowed 15.97 percent for 18.2 percent in FY20.
You would have thought that non-performance would be penalized. This treatment is anything but. Mind you, the T&D losses alone cost Rs59 billion financial loss, which is the revenue loss incurred over and above the allowed limit. The limit allowed itself has been on the higher side, when it should in fact have been following a sliding scale, as was told by one of the many energy plans presented at various occasions in the last five years. The total electricity lost just to T&D losses in FY20 alone was worth Rs480 billion. This is not a typo. Let that sink in. Only that Rs420 billion is already part of what the consumers are billed for.
And then comes the collection problem, which does not have as sexy a name as T&D losses. That could be one reason why it does not even get half the mentions, despite being thrice as problematic. Just like her more famous sister, collection rates have been as stubborn. They have stuck around 90 percent for quite some time. Now 90 percent would sound sweet for some folks, where 33 percent passes for most things. Only that the regulator assumed the good discos would collect 100 percent of the billed amounts. Needless to say, another Rs160 billion gets taken out from the paying pockets – for the power that a bad consumer did not pay.
And then people keep on wondering why the energy sector remains in a perpetual mess. And some “revenue hungry” experts would be quick to point out how T&D losses “while important are not going to solve the problem”. Well, give it a shot for once. All else has failed too. And if you think raising tariffs will help, bear in mind the collection rates drop and T&D gets higher as tariffs rise. But let’s all focus on the fancier and “out of the box” solutions. Keep negotiating contracts, keep issuing cash, keep settling payments with PIBs. Call them reforms. And then wait for the Performance Evaluation Report of FY21.
