Power ministry unveils ratings for distribution companies
Moneylife Digital Team 20 March 2013

The programme covers all the 39 state power discoms. It, however, does not cover state energy departments and private discoms


The Union power ministry on Tuesday launched a ratings programme for distribution utilities which would enable them to procure loans at better interest rates based on their financial, managerial and regulatory performances.


These entities would be rated on the basis of seven parameters, including financial status, meeting regulatory norms and others, power minister Jyotiraditya Scindia said while releasing ratings for distribution companies (discoms).

State-run Power Finance Corporation, which is coordinating the programme, has appointed ICRA and CARE to assign ratings. The programme covers all the 39 state power discoms. It, however, does not cover state energy departments and private discoms.

Scindia said that integrated rating would facilitate realistic assessment of performance of distribution utilities and would enable them to weigh their strengths and weaknesses.

“It will enable identification of areas of concern that adversely impact their performance and incentivise utilities to improve their operational and financial performance,” power secretary P Uma Shankar stated.

This annual exercise would cover year-on-year comparison of AT&C losses, regulatory environment, payments of subsidy and cross subsidy, quality of accounts, assets created, automated pass through of fuel cost, short-term power purchase, debt servicing, etc.

The financial performance of the discoms gets the highest weightage in the rating mechanism. Four discoms from Gujarat have received top ratings with very high operational performance and financial performance capability.

Meanwhile, when asked about the financial restructuring plan, Scindia said, “I have said that before also... eight states have come on board for the FRP, of the Rs1.9 lakh crore of liabilities Rs1.5 lakh crore would be restructured.”

As per the financial restructuring plan approved by the government last year, loans of discoms would be restructured.

Taking over of 50% short-term liabilities of discoms by respective state governments is a major proposal in the Central government’s plan.

Incentives such as reimbursement of 25% of debt taken over by the state government are part of the scheme.

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