Companies & Sectors
UDAY debt recast reforms vital for power sector: Fitch
American Ratings agency Fitch on Monday maintained a stable outlook for state-run power utilities - NTPC PowerGrid and NHPC - saying the implementation of the government's UDAY debt recast and reform package is key to their ratings outlook in future.
 
"Successfully addressing the weak financial positions of state distribution companies (discoms) is key to improving the health of India's power sector. The weak fiscal position of these entities has led to sustained delays in payment to market participants and weak offtake from power generators, in addition to increasing the risks associated with much-needed investment in the sector," Fitch said In a report.
 
"States opting for the package and delivering on loss reductions and efficiency improvements over the medium term remains essential for the success of the programme.
 
"The debt restructuring plan will substantially reduce discoms' near-term debt burden; and more importanly, their high interest costs, which account for a large share of the discoms' losses," it added.
 
Fitch said a failure of the distribution companies' (discom) reforms would be negative for the entire power sector.
 
Moreover, any increase in receivable days for central utilities following the expiry of tri-partite agreements would be a negative for their financial profiles of these entities, it added.
 
State-run power distribution companies have accumulated a debt burden of over Rs.400,000 crore, crippling capacity in many cases to purchase power.
 
Earlier this month, the union cabinet approved the Ujjwal Discom Assurance Yojana (UDAY), under which states are being encouraged to take over 75 percent of the debt of the ailing state electricity boards.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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RBI revises oversees borrowing limits for India Inc
Aiming to encourage the flow of foreign funds into India, the country's central bank on Monday revised a major guideline which administered the oversees borrowing limits for India Inc.
 
The Reserve Bank of India (RBI) said that it has revised the framework governing the external commercial borrowing (ECB) facility for the Indian industry.
 
It said that the revised framework has been drafted considering the current macro-economic developments and the experience gained over the last 10 years.
 
The RBI elaborated that the new framework takes a more liberal approach towards ECB, with fewer restrictions on end uses and higher all-in-cost ceiling.
 
Similarly, the new norms, take a more liberal approach for Indian rupee (INR) denominated ECBs, where the currency risk is borne by the lender.
 
Furthermore, the list of overseas lenders have been expanded to include long term lenders like sovereign wealth funds, pension funds and insurance companies.
 
However, the RBI has maintained a small negative list of end-use requirements applicable to long-term ECBs and INR denominated ECBs.
 
Other major features of the new policy include, raising of limit for small value ECBs with minimum average maturity (MAM) of 3 years to $50 million from the existing $20 million.
 
The Indian apex bank said that the framework for ECB as a means to attract flow of funds from abroad will continue to be a major tool to calibrate the policy towards capital account management in response to evolving macro-economic situation. 
 
Commenting on the latest reform measure, Shaktikanta Das, secretary economic affairs, with finance ministry twitted that the government, RBI, SEBI are working together with positive interaction and understanding and will continue to work for reforms and stability.
 
In addition to the latest reform measure, RBI said that it will review the new ECB guidelines after one year based on the experience and evolving macro-economic situation.
 
In September 2015, RBI had placed the draft proposal for new ECB framework in the public domain for wider consultation.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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India needs $2.8 trillion investment for energy supply: Report
India requires a whopping $2.8 trillion investment to meet its growing energy needs in the coming years, with 75 percent of that for the power sector, a special report by the International Energy Agency (IEA) said on Monday.
 
"India's energy needs require a huge commitment of capital to the tune of $2.8 trillion. Mobilising cost-efficient investment above $100 billion per year will be a challenge for the Indian policy at national and state levels," the report noted.
 
The special report on future development in India, which is a part of the agency's World Energy Outlook 2015', was released here at a workshop organised by the city-based Centre for Study of Science, Technology and Policy (CStep) and IEA.
 
"A transparent system of approvals and clearances for viable projects with timelines and accountability is essential to win public consent. India will also need to tap investors and sources of finance on suitable terms for low-carbon investment," the report pointed out.
 
As the release coincided with the UN Climate Summit (COP-21) in Paris, the report said sustainable and affordable energy was indispensible to India's economic growth and poverty reduction, as the country's carbon intensity was a critical measure of the success or failure of efforts to tackle climate change.
 
Prime Minister Naredra Modi also addressed CoP-21.
 
The Paris-based autonomous agency (IEA) was set up in 1974 to promote energy security among its 29-member countries through collective response to disruptions in oil supply and provide research and analysis on ways to ensure reliable, affordable and clean energy for its members and others.
 
Observing that what happened in India would influence the global energy economy, the report highlighted that as the country was growing fast, energy was central to its socio-economic growth and fuel demand for greater mobility and infrastructure development to meet the needs of the world's populous country.
 
"Though home to 18 percent (1.3 billion) of world population, India uses only six percent of the world's primary energy despite its consumption almost doubling since 2000 with potential to grow further," the report noted.
 
More than any country, India will contribute to the projected rise in global energy demand though its energy demand per capita will be still 40 percent below the world average.
 
"India's total energy demand doubles, propelled by an economy that is five times larger in 2040 and a demographic expansion that makes it the world's most populous country," the report indicated.
 
With energy use declining in many developed countries and China entering a less energy-intensive phase in its development, India emerges as a major driving force in global trends, with modern fuels and technologies playing a part.
 
"Surging consumption of coal in power generation and industry makes India the largest source of growth in global coal use. Oil demand increases by more than in any other country, approaching 10 million barrels per day by 2040," report added.
 
The report was compiled with inputs from industry and leading academic and research organisations.
 
CStep executive director Anshu Bhardwaj highlighted the importance of the report for the CoP-21 meeting.
 
IEA's resources and investment unit head Tim Gould presented the key findings, while CStep advisor S.S. Krishnan cited the agency's key pillars from energy perspective.
 
Representatives from government, academia and industry participated in the interactive workshop.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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