ICRA maintains negative outlook on power distribution sector

The Investment Information and Credit Rating Agency (ICRA) has maintained a negative outlook on the power distribution segment. The consolidated debt of state power distribution companies is estimated at Rs 6 trillion in the financial year (FY) 2022, which is the highest, post the implementation of debt restructure scheme under the Ujwal Discom Assurance Yojna (Uday), ICRA told the media. This is in addition to Rs 1.27 trillion pending discom payables to power generators as of December 2020, 30% higher on a year-on-year (YOY) basis. The credit profile of the state-owned distribution utilities continues to remain stressed due to higher level of technical and commercial (AT&C) losses compared to regulatory norms, inadequate tariffs in relation to their cost of supply, and inadequate subsidy support from the respective state governments, said ICRA.4th Indian Cement Review Conference 202117-18 March Click for event info The credit rating agency pointed out that the credit profile of several privately-owned discoms has remained healthy, with support from superior operating efficiencies, favourable demographic profile and timely pass-through of cost variations to consumers. The recent announcement of the revamped reforms-based result-oriented scheme in the Budget 2021 with an outlay of over Rs 3 lakh crore to be spent over five years, is directionally in line with the intent to improve the viability of state-owned discoms. ICRA said that a big part of this outlay is expected to be towards smart meters and upgrading distribution infrastructure. The state-owned discoms could look at various measures to reduce book loss levels through improvement in distribution loss levels by use of smart meters, use of distributed solar projects for supply of power to agriculture consumers and graded tariff hikes without any tariff shock to the consumers, added ICRA. Image Source Also read: Unshackling the distribution business in India