A swelling mountain of bills plagues India’s power industry

Woman walk past a Sterlite Power Transmission Ltd. transmission tower in Rajouri district, Jammu and Kashmir, India, on Thursday, Nov. 16, 2017. In Prime Minister Narendra Modi’s push to supply electricity to every Indian household, connecting homes in the state of Jammu & Kashmir might be the toughest. Along India’s violence-prone northern border, engineers and construction workers are electrifying one of the country’s most inhospitable states.

A growing pile of unpaid bills in India’s power sector is risking the country’s development, Prime Minister Narendra Modi said, urging states to clear up their arrears to help modernize power systems.

The South Asian nation’s power retailers, mostly controlled by provincial administrations, are burdened by heavy losses and together have nearly 1.4 trillion rupees ($17.7 billion) in unpaid bills as well as subsidies from their governments for providing cheaper power to some consumers, Modi said at a virtual event Saturday.

As a result the utilities have racked up more than 1 trillion rupees in overdue payments to generators, leaving the distributors with inadequate resources to overhaul their networks.

The financially squeezed distributors are often seen as the weakest link in the country’s electricity industry, causing distress that trickles through the chain, from power producers, to coal suppliers and project lenders. Nearly 90% of India’s electricity is sold through these utilities and their inability to pay on time is seen as impeding investments in the country’s energy transition.

“For the country’s rapid growth, it is necessary that its power and energy infrastructure is always robust,” Modi said. “Finding a solution to the current challenges is the need of the hour.”

On an average, the hamstrung distribution utilities lose payments on about a fifth of the power that passes through their network, mainly because of theft, leakages and sloppy billing and collection. Political interference also means they are forced to supply power below cost to some consumers, including poor households and farmers, although the compensation from the state governments on such subsidized supplies isn’t always regular.

Modi’s government has started a 3.1 trillion rupees program to help turn around these companies, with the help of technology, including smart meters, and improved efficiency. An earlier federal government-led plan started in 2015 that aimed to revive the retailers by 2019 failed to meet that goal.