India's distribution firms to go under financial, operational restructuring

Will the long years of cash losses end soon?

Indian state distribution companies struggling with years of cash losses will have breathing space in 2017, with 16 states and a union territory signed up for voluntary financial and operational restructuring of their distribution utilities, according to a report by Fitch Ratings.

However, Fitch Ratings believes sustained improvement in distribution companies' financial profiles will hinge on the gradual reduction of network losses. Generation and transmission utilities will in turn benefit from timely clearance of dues and higher utilisation rates.

The tri-partite agreements the central government-owned utilities – NTPC Limited, NHPC Limited and Power Grid Corporation of India Ltd–had to ensure collection of dues from the distribution companies lapsed in October 2016.

"There is no clarity yet when or which, if any, of the agreements will be extended," the report added.