Discom losses to halve by FY19, says Crisil

The total debt of Rs 1.34 lakh crore of power generating companies is at risk over the medium term which is not good news for the power consumers or the banks.

Of this, 45 per cent or Rs 76,000 crore, of debt could benefit from structuring under various tools provided by the Reserve Bank of India (RBI) to banks to support viable projects according to Crisil.

Another 15 per cent or Rs 24,000 crore of debt, has the backing of strong sponsors so overall Rs 70,000 crore of debt to weak generating companies, which were operational as on March 2016, is at risk.

In the under construction category 26 projects with a capacity of about 24,000 MW, are also weak as their debt outstanding is Rs 64,000 crore and this is also at risk.

The banks are baring the brunt of this as their NPAs in the power sector have increased sharply from 1.6 per cent a year ago to 5.7 per cent of the total loans as on March 31, 2016 and generation companies contributed to this significantly.

Despite around Rs 75,000 crore of restructured loans to discoms getting converted to state government bonds under the Ujwal Discom Assurance Yojana (UDAY) the stressed assets that have been restructured (RSAs) are at a high of 20 per cent of the total RSAs outstanding in the banking sector.

The total loans to the power sector that are under “distress” are high at 16.4 per cent as on March 31,2016 but lower than the 19.3 per cent in 2015.

Crisil estimates the aggregate ‘gap’, or loss, of distribution companies (discoms) of 15 states that have joined the Ujwal Discom Assurance Yojna (UDAY), would more than halve to 28 paise per unit by fiscal 2019 compared with 64 paise in fiscal 2016 and this would reduce losses to Rs 20,000 crore from Rs 37,000 crore. Gap is calculated as average revenue realised minus average cost of supply.

Reaching nil as envisaged under Uday will be impossible as some states have very high aggregated technical and commercial (AT&C) losses and less preparedness to reduce it because of inadequate feeder separation, feeder and distribution transformer metering, and poor track record of other efficiencies.