New Delhi: Global financial services firm Moody's today said recent power outages underline the need for sectoral reforms while the long-term implications could be negative depending on the type of government response.
Moody's Investors Service noted the recent electricity supply disruptions—that affected about 60 percent of the population—add voice to a growing chorus for power sector reform.
"The long-term implications for the power sector could be negative depending upon the type of government response," it said in a statement.
Triggering one of the worst power outages in the world, three transmission grids—Northern, Eastern and North Eastern—tripped on 31 July. The incident happened less than 24 hours after Northern Grid had failed and was restored.
"...the disruptive outages will present an opportunity for government officials, regulators, utilities, and consumers to confront the structural challenges facing the Indian power sector and consider reforms that will improve the availability and reliability of electricity," it said.
Moody's said while rolling power outages are not new to India, the recent event adds increased pressure for power sector reform.
"As the structural challenges of the Indian power sector affect each step of the value chain, any meaningful improvement will require substantial investment of time by a wide range of stakeholders, and likely result in greater need for investment in the power sector," Ray Tay, a Moody's assistant vice president and analyst, said.
"We would expect to see increased debt-funded capex from government-owned utilities as well as government efforts to spur private investment, which will pressure credit quality over the medium- to long-term," Tay noted.