NEW DELHI: Ratings agency Moody’s Investor Services maintained its earlier negative outlook for the Indian electricity sector, even as the outlook for the rest of the countries in the Asia-Pacific region remained stable. According to Moody’s, the uncertainty over demand revival and delayed payments from state governments to power distribution companies are the primary reasons for the negative outlook.
“Cash conversion cycle for power companies may continue to remain under pressure with weakening in state government finances and slower economic growth,” Moody’s noted. India’s discoms have seen a steady increase in pending payments to power generators-this despite the Centre’s `1.2 lakh crore liquidity support programme.
Discom dues stood at Rs 1,25,743 crore in October 2020— 34.4 per cent higher than last year. In May this year, the Indian power sector had been downgraded by the ratings agency from stable to negative due to the impact of the pandemic on demand. Other reasons cited for the downgrade were mounting discom dues, and policy measures aimed at increasing end-user ease.
On the plus side, regulatory measures such as the UDAY scheme have also improved credit-profiles.
Going forward, Moody’s expects India to be a key player in increasing renewable power capacities. In particular, renewable projects in China and India enjoy priority in power dispatch, which significantly reduces demand risks. It also noted that renewable projects in India have long-term power purchase agreements with fixed tariffs.