Narendra Modi’s cash ban spells bonanza for power retailers

New Delhi: Prime Minister Narendra Modi’s decision to scrap large bank notes have an unintended beneficiary: India’s cash-strapped power companies.

Electricity consumers who hadn’t paid their bills for months are queuing up to square their accounts as the old bills can still be used to pay charges until 24 November. In a surprise move, Prime Minister Narendra Modi withdrew Rs500 and Rs1,000 bills as legal tender from 9 November. Since then, people have formed lines at banks, fuel retail stations and electricity billing offices to use or exchange their old notes.

Power retailers in the northern state of Haryana saw unexpected collections of Rs750 million ($11 million) in the first ten days after the decision, Anurag Rastogi, principal secretary in the province’s power department, said by phone. Other consumers paid bills well before the due date, causing a temporary surge in collections, he said. Neighbouring Punjab received extra collections of about Rs200 million, said S.C. Arora, finance director at Punjab State Power Corp.

Modi’s government has been trying to revive the poorly-performing power distributors by reorganizing their debt, cutting costs and increasing revenue by reducing theft and improving collections. The retailers purchased electricity at an average price of Rs5.20 per kilowatt hour in the year ended March 2015 and earned an average Rs4.46 per kilowatt hour on sales, according to the latest data from Power Finance Corp.