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Power ministry unveils credit ratings for the power distribution sector

20 Mar 2013 Evaluate
In its ongoing exercise to reform the power distribution sector, the government has launched a credit rating mechanism for distribution companies of 20 Indian states, which would enable them to get loans at better interest rates based on their financial, managerial and regulatory performances.
 
These agencies would be rated on the basis of seven parameters, including financial status, meeting regulatory norms and others. While releasing ratings for distribution companies (discoms), Power Minister Jyotiraditya Scindia said, integrated rating would facilitate realistic assessment of performance of distribution utilities and would enable them to weigh their strengths and weaknesses.
 
The rating methodology has been developed by the ministry with help from private ratings agencies CARE and ICRA. The programme covers all the 39 state power discoms, however, does not cover state energy departments and private discoms.
 
Further, the ratings would also enable identification of areas of concern that adversely impact performance and incentivise utilities to improve their operational and financial performance. 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 highest weightage in the rating mechanism will be given to financial performance of the discoms. Four discoms from Gujarat have received top ratings with very high operational performance and financial performance capability. As far as financial restructuring is concerned 8 states have come on board for the FRP and of the Rs 1.9 lakh crore of liabilities Rs 1.5 lakh crore would be restructured.

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