Power distribution utilities’ debt will hit an all-time high of Rs 4.5 lakh crore by the end of the ongoing financial year, CRISIL Ratings said.
The liquidity package of Rs 90,000 crore announced by the government last month offers a breather, but structural reforms have become critical to sustainability of discoms, the rating agency said in a statement.
The package will help state power distribution companies (discoms) settle a significant portion of their overdue bills to generating companies, it said.
However, it noted that with power demand weak and cash losses high amid the coronavirus pandemic, discoms would end up owing lenders a staggering Rs 4.5 lakh crore by the end of 2020-21, or 30 per cent more than that in the last fiscal.
Such a material increase in debt would deteriorate the credit profiles of discoms and make structural reforms critical to their sustainability, a study of 34 state discoms (from 15 states), which account for over 80 per cent of India’s power demand, shows, CRISIL stated.
According to it, presently, only one in five discoms is capable of servicing debt through own cash flows and budgeted subsidies.
The scenario would worsen this fiscal because of weak demand for power, which comes on the back of an already low base of last fiscal, rising costs, and losses caused by the pandemic-led lockdown, it added.