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Cash flow of power distribution firms likely to improve

<p>DISCOMs have been working aggressively towards lowering their losses and improving collection efficiency. As discoms work towards lowering their aggregate technical and commercial losses (a function of T&amp;D losses and collection efficiency) below the regulatory benchmarks, their cash flows are likely to improve further. Discoms have also gained from healthy tariff hikes allowed in most states between 2011-12 and 2015-16 apart from cost rationalisation initiatives.</p> <p>The electricity regulator had lowered the incentive income available to thermal generators for the period between 2013-14 and 2018-19, which resulted in a dip in per unit costs. The government has also worked on coal linkage rationalization, which has led to lowering of fuel cost for some plants. The output of power from efficient plants has gone up with the same level of coal input owing to the government&rsquo;s directive of closing old and inefficient plants and diverting their linkages to efficient ones. The discoms&rsquo; cash flow generation is likely to remain healthy in 2018-19 given healthy volume growth as reflected in the power demand growth rate between 5% and 6%.</p>