NEW DELHI : A transparent tariff revision mechanism and participation by private players are the long-term solutions for a healthy electricity distribution sector in the country.The Government’s proposal to restructure short-term debts to the tune of Rs 1.20 lakh crore in the books of State Electricity Distribution Companies (Discoms) would provide them only a temporary reprieve from weakening finances, said global ratings agency Standard & Poor’s (S&P).“We believe a sustained improvement in the credit quality of distribution companies and greater private sector participation can provide a long-term solution to the country’s power sector woes,” said Standard & Poor’s credit analyst Rajiv Vishwanathan.
“Given India’s enormous growth potential, we believe the private sector would be keen to invest in this sector, particularly if regulations are transparent and fuel supply is reliable. The government’s will and ability to undertake necessary reforms will therefore be put to test,” S&P said.“One key reason is that several Indian companies have broken away from state-supplied electricity, and now depend on their own captive power plants. However, we believe that such a practice reduces the competitiveness of Indian businesses and deters investments by overseas companies,” said Vishwanathan.
The proposed rejig plan would not impact ratings of Indian banks or financial institutions or it will have an impact on sovereign rating.The loss of revenue due to gross inefficiencies exacerbates the inability of Discoms to purchase sufficient power to meet demand or make timely payments to power generators. Pilferage also results in disproportionately low revenue to power distributors and low recovery for generators from the sale of power.