Moody’s Investors Service said on Thursday that the government’s Ujwal Discom Assurance Yojana (UDAY) will likely improve the financial capacity of the state distribution companies to make timely payments to power generators. This, along with improvement in domestic coal production, has led to the rating agency issue a stable outlook on the Indian power sector. Aggregate technical and commercial (AT&C) losses, which is one of the main benchmarks to evaluate the performance of discoms, have come down to 19.68% in March, 2017, from about 24% a year ago. The gap between the discoms’ average cost of supply (ACS) and average revenue realised (ARR) has narrowed by 7 paise per unit, which translates into savings of over Rs 7,900 crore for the discoms. Discoms had also saved Rs 11,989 crore in interest costs till December 2016. However, the savings were because of the lower interest costs paid as per the conditions of the UDAY scheme. However, Moody’s sounded a note of caution arising from low plant load factors (PLF) of thermal power plants. “The capacity utilisation of Indian power generators will likely be limited by the significant increase in new generation capacity over the last few years, and relatively weak electricity demand,” says Abhishek Tyagi, senior analyst and vice-president at Moody’s. Average PLF for thermal power plants across the country was 59.8% in FY17. PLF for private sector plants was 55.7%.
You may also like to watch:
Moody’s expects strong growth over many years in the Indian renewable energy market. However, weak credit quality of the discoms, an evolving regulatory framework, financing and execution risks might pose challenges to the sector. It also also sceptical about the viability of ultra low tariffs discovered recently. Solar tariffs fell as low Rs 2.44/unit and Rs 2.62/unit at the reverse auctions held in May for solar energy plants at Rajasthan’s Bhadla solar park.