Financial deficit in power distribution at all-time high

The financial health of power distribution companies (discoms), which had improved in recent years, has been hit again. The annual rating of discoms by the financing agency, Power Finance Corporation (PFC) has reportedly revealed that the financial deficit in the sector is at the highest ever and is widening because of their declining profitability. The power distribution sector’s absolute cash-adjusted gap averaged to Rs 1.04 trillion, which is nearly 1.4 times the recorded losses, as per reports. The sustained losses have led to a liquidity crunch in the power distribution sector, and the discoms’ current liabilities amount nearly twice their overall liquid current asset value in financial year 2020-21 (FY21).

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