The nation-wide lockdown because of Covid-19 is already beginning to undercut the revenues of Indian electricity distribution companies (discoms). They face the twin challenges of losing revenues from high-paying commercial and industrial consumers while having to generate bills and seek timely payments from domestic consumers. The poor cash-flow has impaired them from paying the power generators. While there is a moratorium on payment to generators, discoms need to innovate to ensure revenue recovery from domestic consumers.
Discoms have temporarily terminated meter-reading and physical delivery of bills across the country. Though automated meter reading infrastructure and smart meters are being used, these cover only a small fraction of domestic consumers. Therefore, most discoms have started billing the consumers on average consumption of the previous months. However, with the onset of summer, household electricity use would increase and the average billed values would be considerably understated. For instance, in peri-urban areas of Lucknow, the difference between consumption during the winter-spring period and summer is as high as 50 per cent. To overcome this issue of seasonal variation, the Indian state of Telangana has decided to bill consumers on the consumption records from the same month in the previous year. The discoms in other states could turn to such options, especially if metered-billing has been in place for a while.
For bill delivery, discoms are using digital channels such as text messages, WhatsApp, mobile applications and emails. A prerequisite to this is a database of consumer phone numbers. However, many discoms do not have an updated database, as per discom officials in Uttar Pradesh (UP). Therefore, in cases where consumers do not receive bills digitally, alternative options must be made available. For instance, BSES Rajdhani Power Limited (BRPL) in Delhi is sharing bills directly if consumers send a WhatsApp text with their consumer account number. Discoms in UP and Karnataka are allowing consumers to self-generate bills on actual consumption (trust billing) by entering their meter readings on the discoms’ website. Consumers who can afford to pay must be encouraged to proactively access and pay electricity bills.
As for revenue collection, electronic payment (e-payment) appears to be the most attractive option currently. However, only a few consumers across the country pay their electricity bills online. For instance, only 19 per cent of all urban consumers in UP paid their bills online in December 2019.1 This share has dropped to 5 per cent in April 2020, potentially because consumers have not received bills. It could also be because of the pandemic induced cash crunch or the state government allowing delayed payments until 30 April 2020. In rural areas of UP, nearly 70 per cent of the consumers pay at the counters in the ‘power-house’ of the local area.
Discoms need to encourage online payments through appropriate incentives, a few of which are listed in Table 1. However, for consumers who are not comfortable with online payments, discoms can offer alternative options, such as bill payments at nearby kiosks, common service centres, and grocery stores. This may be allowed in areas where there are fewer movement restrictions and the risk of virus-spread is low.
|Rajasthan||Ajmer Vidyut Vitaran Nigam Limited||
|Delhi||Tata Power Delhi Distribution Limited||
|BSES Rajdhani Power Ltd||
Source: Authors' collation
Creating a safety net for vulnerable households
The lockdown has pushed millions of Indians into severe economic distress (income and/or livelihood loss). Many consumers would find it difficult to pay their electricity bills, particularly the poorer households electrified under the Saubhagya scheme. Most discoms have extended the due date for bill payment by a month or two, without charging any late payment fee. While such measures are useful across the board, it would be inadequate for those who simply cannot afford to pay because of the loss of incomes.
To protect such vulnerable consumers from the threat of disconnection or rising arrears, the Central government could consider waiving-off electricity bills for three months and directly compensating discoms. A lifeline electricity consumption level of 50 units/month2 can be used to identify consumers in need of such support. As per the 68th round of the National Sample Survey (2011-12), nearly 50 per cent of Indian households consume less than 50 units per month, with a majority being rural households. The power tariffs for low-consumption households are already kept low through subsidies from the state governments and prevailing cross-subsidies. The proposed safety net, covering half of India’s population, would require an additional outlay of around INR 3000 crore, over a three month period.3 This is less than 5 per cent of the total annual power subsidy on offer across the states.
Restrictions on movement are likely to be reimposed as we experience waves of Covid19 in the coming year. As a result, the economic slump could be protracted. The current reprieve (moratorium on payment, and waiving off late charges etc.) for consumers and discoms alike, is not likely to be sustainable over extended durations. The current situation presents an opportunity for discoms to adapt, and conceive more efficient modes of bill delivery and revenue collection, which would hold them in good stead even when ‘normal’ operations resume and prepare for future disruptions.
Kanika Balani is a Research Analyst, Sunil Mani is a Programme Associate and Shalu Agrawal is a Programme Lead at The Council.
1As per UPPCL’s Discom-wise/Substation-wise 311 Report for December 2019, retrieved from: https://upenergy.in/uppcl/en/page/monthly-progress-report
2Equivalent to the use of two LEDs (9 Watt each) and a fan (70 Watt) for 18 hours a day.
3Assuming an average consumption of 30 units/month and additional subsidy requirement of INR 3/unit, over and above the subsidised tariff for the low-consumption category.