Power sector faces multiple challenges: Icra

MUMBAI: The power sector faces multiple challenges including high subsidy for state utilities and uncertainty over tariff compensation to power producers, Icra said today.
Besides, the Plant Load Factor at thermal plants declined to 65.6 per cent in the 2013-14 fiscal from 69.9 per cent in FY'13, primarily due to backing down of generation units due to low demand from discoms.

The credit rating agency said: "Plant Load Factor levels varied widely and showed a mixed trend across generating stations driven by cost-competitiveness of power generated, extent of fuel availability and availability of PPA, which allows the pass-through of cost in consent with distribution utility."

For any sustainable improvement in the PLF levels, demand recovery from the industrial consumers and more importantly, improvement in the financial position of state utilities remain critical, it said.

According to Icra, the dependence on government subsidy for state utilities is likely to increase by 17 per cent to Rs 72,000 crore in 2014-15 compared to last year, thus posing a challenge for the power sector.

"Overall subsidy dependence for FY15 for distribution utilities in the 16 states is estimated to increase to Rs 72,000 crore mainly on account of upward pressure on cost of power supply and continued subsidised nature of tariffs for agriculture consumers," the report said.

Icra noted that among all the utilities, subsidy dependence for discom in Maharashtra is estimated to increase sharply by about 55 per cent on a year-on-year basis in FY15 as a result of tariff subsidy of 20 per cent announced by the government for 11 month period (January- November 2014).