Discoms face mounting pressure as India’s demand for electricity surges – learn about the challenges ahead!
Summer is the season of sunshine, beach days, and ice-cold lemonades, but it also comes with a massive surge in demand for electricity. As the temperature has continued to rise steadily since February, the Ministry of Power has predicted a peak demand of 2.29 lakh MW by April 2023.
This concerning issue has sparked an urgent call for action from all stakeholders, urging power companies to take necessary steps to meet the increasing demand and ensure that people do not face power cuts during this scorching season.
The central government is taking measures to avoid blackouts and meet coal shortages for the upcoming summer. This includes generating electricity through imported coal and operating at full capacity for three months starting 16th March 2023. However, the rising cost of coal-based power and a potential surge in electricity demand may lead to a costly summer for electricity distribution companies (discoms).
What’s Happening?
Electricity is essential to our daily lives, powering our homes, appliances, and gadgets. But have you ever wondered how this electricity reaches your home? It goes through three stages: production, transmission, and distribution.
The companies that generate electricity are called Gencos, and they send the electricity to transmission companies known as Transcos. These Transcos then transmit the electricity to distribution companies, or Discoms, who are responsible for delivering the electricity to our homes.
However, according to a Business Standard report, Discoms face a challenging situation due to rising costs. As a result, many big states such as Uttar Pradesh, Maharashtra, and Madhya Pradesh have proposed increasing the electricity fee by 15% to 30%. This proposal is yet to be approved.
In January 2023, the total amount of money owed by power producers to power distribution companies was reduced by almost 50% to Rs 62,681.68 crore. This is a significant drop from the outstanding Rs 1,21,030 crore in January 2022. However, despite this improvement, the proposals from the power distribution companies suggest that the cost pressure on them is still very high. This is particularly worrying as these companies are already facing losses.
Why is Discoms Important?
Electricity distribution companies, or Discoms, are important in supplying and distributing electricity to customers such as industries, businesses, farmers, and households. They also help fund electricity generation and transmission by collecting payments from consumers. This means that Discoms are responsible for ensuring that the electricity bills are paid on time, which is necessary to keep the electricity supply chain running smoothly. Without Discoms, the production and transmission of electricity would not be financially sustainable.
Why is the Pressure on Discoms Increasing?
Although the Indian government has been making efforts to increase electricity generation capacity, over 70% of the electricity in India is still generated from coal. The government has instructed coal-based power plants to operate at full capacity to meet the rising electricity demand, which has led to an increase in the purchase of coal by Discoms. This has caused the cost of production to rise, and the pressure is now falling on power distribution companies.
Moreover, the share of renewable energy (solar and wind) in the total electricity supply is only 10%. This has made it difficult for Discoms to switch to cleaner and more affordable energy sources. Consequently, the Discoms are proposing to increase electricity rates to cover the rising costs of generation.
The government is yet to decide on the Discoms’ proposals to increase electricity rates. However, the pressure on Discoms is increasing due to the rising cost of production and the dependence on coal-based energy sources.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
