Fitch: reform on India's state power utillities pose a challenge

The financial profile of Indian state power utilities is weak due, according to Fitch. This is due to the lack of cost-reflective retail tariffs, delays in receipt of subsidy payments and high transmission and distribution losses.

n view of the mounting losses, Fitch has observed that reforming the sector by fixing adequate tariffs will be a challenge for the states.

Since most of the losses incurred by the state utilities can be attributed to discoms, their weak financial position has resulted in delays in payments by few of them to lenders, power generators and power traders.

To address the issue of mounting losses, the government has constituted a high level panel on the financial position of distribution utilities, the Shunglu Committee, to make recommendations on restoring the financial viability of the power sector. It is the implementation of the Shunglu committee recommendations that Fitch believes would be an
arduous task.