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Key concerns like huge cash losses, lack of power reforms and deterioration in Aggregate Technical & Commercial losses (AT&C) losses have forced a downgrading of Tamil Nadu Generation and Distribution Corporation Ltd (TANGEDCO) in the Annual Integrated Ratings of State Power Distribution Utilities.
TANGEDCO has been graded C + (score between 20 and 35 in the scale of 100) by the rating agencies as per the framework approved by Union Ministry of Power. As per the grading definition, C + means low operational and financial performance capability. TANGEDCO was graded B twice during the first and third integrated ratings.
According to a note accompanying the ratings, TANGEDCO, which has a “high financial risk profile with increasing cash losses, poor capital structure with accumulated losses of over Rs. 65,000 crore as on March 31, 2015,” did not file a tariff petition for FY 2015, FY 2016 and FY 2017.
Lack of power sector reforms as reflected in unsatisfactory progress on consumer metering besides continuance of free or subsidised power schemes, substantial increase in dependence on tariff subsidy from the State government, which leads to the increased exposure of the credit risk of the State government for its functioning, are the other key concerns identified by ICRA, the agency.
It also pointed out that the AT&C losses, which stood at 21.7 per cent in FY 2014, went up to 24.4 per cent in FY 2015. “High average cost of supply due to the large quantum of power purchased from traders and from uncompetitive independent power producers; commissioning of the new plants and the resultant increase in own generating capacity or share of central generating stations would aid in reducing the supply costs,” it noted.
The fourth Annual Integrated Ratings of State Power Distribution Utilities as per the framework approved by Ministry of Power submitted by ICRA Limited and Credit Analysis and Research Limited has rated 40 utilities across 21 States. The ratings by designated credit rating agencies ICRA and CARE on a range of parameters covering operational, financial, regulatory and reform parameters, however, did not cover State power or energy departments and private sector distribution utilities.
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