Fitch says sufficient and timely tariff hike must for discom health

New Delhi: Adequate and timely tariff hikes, and lower aggregate technical and commercial (AT&C) losses are required to sustain structural improvement of power distribution companies, rating agency Fitch says.[caption id=“attachment_2331100” align=“alignleft” width=“380”]  Representational Image. Reuters[/caption] “The government’s revival package introduced in November 2015 for the distressed distribution companies will provide some breathing space, but successful implementation of adequate and timely tariff hikes, and lower aggregate technical and commercial (AT&C) losses will be essential to sustain structural improvement,” Fitch said in a statement. According to the statement, India’s power generators continue to face low and declining capacity utilisation, mainly because financially-stressed distribution companies (discoms) are unable to purchase power. This underscores the importance of successfully addressing the power discoms’ financial health. For the first half of 2015-16, the overall coal-fired plant load factor (PLF) in India fell 3.2 pp (percentage points) yoy (year-on-year) to 60 percent. The Central government-owned generation companies (gencos) saw the corresponding figure fall 1 pp yoy to 72 percent while state and private gencos saw the metric slip 5 pp to 55 per cent and 2.3 pp to 57 percent, respectively. The country’s gas-based PLF for the said period remained unchanged at a lowly around 22 percent. It’s primarily fuel unavailability that led to gas-based capacity either stranded or operating at grossly sub-optimal levels. On the other hand, the country’s thermal power generation capacity has increased by an impressive 11 percent over the last year to 194 GW at September-end of 2015, driven by addition of coal-fired power plants and privately owned facilities, it said. Fitch expects NTPC, NHPC and Power Grid Corporation of India to incur significant expansionary investments over the next few years, which would keep their financial leverage elevated. PTI