Icra pegs Rs 85,000 crore subsidy dependence for discoms in current fiscal

Rating agency Icra has estimated a subsidy dependence of Rs 85,000 crore amid low tariff hikes allowed for discoms in 2018-19, and expects improvement in thermal plants capacity utilisation or PLF in near to medium term

Press Trust of India July 10, 2018 10:55:01 IST
Icra pegs Rs 85,000  crore subsidy dependence for discoms in current fiscal

New Delhi: Rating agency Icra has estimated a subsidy dependence of Rs 85,000 crore amid low tariff hikes allowed for discoms in 2018-19, and expects improvement in thermal plants capacity utilisation or PLF in near to medium term.

"The domestic electricity demand growth is likely to remain at about 5 to 6 percent in near to medium term, supported by thrust towards rural electrification, expected recovery in industrial/ commercial segment along with some improvement in the paying capacity of the state-owned distribution utilities," Girishkumar Kadam, Sector Head & Vice President, Icra Ratings, said in a statement.

However, Kadam said the augmentation of domestic coal supply to meet such increase in demand for the IPPs/ Gencos remains crucial, and as a result, any delay in ramping up of coal supplies from domestic sources will lead to increase in the dependence on coal imports as seen during FY2018.

Icra pegs Rs 85000  crore subsidy dependence for discoms in current fiscal

Representational image. AP.

The all India electricity demand growth slowed down to 3.1 percent on a year-on-year basis in the first two months of FY2019 against the growth of 7.5 percent reported in Q4 FY2018 and lower than the growth of 5.9 percent witnessed in the first two months of FY2018, it said.

However, May-2018 witnessed the highest ever monthly electricity demand at all India level. With respect to the distribution segment, the state electricity regulatory commissions (SERCs) in 21 out of the 29 states have issued tariff orders for FY2019 so far, reflecting reasonable progress in the issuance of tariff orders for the year, it added.

According to Icra, the median tariff hike based on the tariff orders issued in the 21 states remained low at 2 percent, with the SERCs in seven states not approving any tariff hike and a downward revision in tariff in two states.

"The tariff hikes approved in many of the states remained lower than the hikes stipulated in the UDAY MoUs, signed by these states. The only exception being the SERC in Jharkhand, which approved a steep tariff hike to cover the entire revenue gap.

"This, in turn, has resulted in higher subsidy dependence for distribution companies (discoms) in few states. The overall subsidy dependence for discoms at all India level is estimated to increase in the range of 7 to 8 percent on y-o-y basis to Rs 850 billion (Rs 85,000 crore) in FY2019," said Vikram V, Associate Head & Assistant Vice President, Icra Ratings.

In another key development, the draft amendments to the National Tariff Policy propose significant reforms in the electricity distribution business, including an emphasis on quality and reliability of supply by the discoms, stricter operating norms, adoption of direct benefit transfer for subsidy payment and moving the consumers from post-paid to pre-paid basis, it said.

While these are positive from the consumer perspective, the implementation of these proposals could face significant challenges and higher funding support requirement for discoms from the respective state governments, Icra added.

Updated Date:

also read

Tiger Woods' car crash caused by unsafe speed of up to 140 kmph, says Los Angeles County's sheriff
Sports

Tiger Woods' car crash caused by unsafe speed of up to 140 kmph, says Los Angeles County's sheriff

Woods's SUV was travelling at up to 87 miles (140 kilometres) an hour before it flew off the road and flipped several times during the accident in Ranchos Palos Verdes, leaving the 15-time major champion with a shattered right leg.

Apple and autonomous vehicles an ideal match, hints company chief Tim Cook
News & Analysis

Apple and autonomous vehicles an ideal match, hints company chief Tim Cook

One option for Apple could be to build an autonomous driving platform for automakers.

Great Wall Motors’ upcoming ORA EV is ‘inspired’ by the original Volkswagen Beetle
News & Analysis

Great Wall Motors’ upcoming ORA EV is ‘inspired’ by the original Volkswagen Beetle

To be unveiled at the 2021 Shanghai auto show, the new ORA EV clearly follows the design template of a motoring icon.