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India’s thermal power generation capacity continued to decline in terms of utilization rates in the first half of the fiscal year ending March 2016, said a Fitch Ratings report on Wednesday.
India’s overall coal-fired plant load factor fell 3.2 percentage points to 60%, and gas-fired utilization remained flat at about 22% in the first half of the year, Fitch said, quoting a report from the Central Electricity Authority.
India’s thermal power-generation capacity increased 11% over the last year to 194 gigawatts (GW) as on 30 September led by the addition of coal-fired power plants and privately owned facilities, the report said.
“The low utilization is primarily due to the inability of financially stressed power distribution companies to purchase electricity, with fuel scarcity contributing to low utilization among gas-fired plants. This underscores the importance of successfully addressing the financial health of the distribution companies,” said the Fitch report.
The government’s revival package, Ujwal Discom Assurance Yojna, or UDAY, which was introduced earlier this month, will allow the states to take over 75% of the debt of discoms. These loans will not be included in the calculation of the state’s fiscal deficit till 2016-17. In addition, the states will issue bonds and the balance discom debt will be converted into loans or bonds at concessional rates.
Fitch expects state-run NTPC Ltd, NHPC Ltd and Power Grid Corp. of India Ltd to incur significant expansionary investments over the next few years, keeping their financial leverages elevated.
While this revival package will provide some breathing space, successful implementation of adequate and timely tariff hikes and lower aggregate technical and commercial (AT&C) losses will be essential to sustain structural improvement, the Fitch report said.
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