Budget 2021: Power generation companies to gain from discoms’ revival
The government’s proposed plan to improve the operations and finances of state-owned distribution companies (discoms), the weakest link in India’s power supply value chain, will help mitigate cash flow stress observed in rated power generation companies over time, according to Fitch Ratings.
The $41 billion plan intends to trim electricity losses, gradually narrow discoms’ cost-revenue gap, improve the reliability and quality of power supply, and promote more sustainable competition in the sector through 2024-25.
“A meaningful improvement in discoms’ economics will benefit power generation companies via higher utilisations and timely clearance of dues,” the US-based credit rating agency said in a statement.
It added that while renewable players benefit from the “must-run” status in India, thermal power plants have suffered part curtailment and lower capacity utilisation driven primarily by stressed discoms, which are unable to buy electricity because of their weak financial positions.
The pandemic has aggravated the discoms’ difficulties due to the fall in electricity demand from higher-paying commercial and industrial customers, payment concessions, and delay in cash collections.
