Sluggish power sector could hit economic growth: India Ratings
Acute fuel scarcity is already hurting power generation. Coal India, the largest supplier to power plants, has not inked any Fuel Supply Agreements (FSAs) since FY 2009.
The report said: "The 114 FSAs for plants commissioned post FY09 and likely to be commissioned till FY15 have a total cumulative capacity of 51,000 MW and with letters of assurance quantity of 216 million metric tonnes (mMT).
"Assuming only 65 per cent to be met through domestic coal, Coal India will have to increase its dispatch to the power sector to 436 mMT by FY15 (a Compound Annual Growth Rate of 12 per cent), which looks difficult."
The total investment required for 51,000 MW, including debt and equity, would be around Rs 2,75,000 crore. With fuel risks, there is a possibility of debt portion - of around Rs 1,75,000 crore - becoming non-performing assets for banks and financial institutions, Garg noted.
India Ratings said government's financial restructuring package for state-owned discoms is a positive step in the short term for the entire value chain of power sector.
"However, its long term benefits would depend on the ability of discoms to lower Aggregate Technical and Commercial losses, hike tariffs and control operational costs such that the average cost of supply decreases and average revenue increases," it noted.
Faced with mounting debts of discoms, which is