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Discoms’ debt to touch Rs 4.5 lakh cr by FY21: Study

CRISIL Ratings said on Friday that the debt of power distribution utilities will touch an all-time high of Rs 4.5 lakh crore by the end of the ongoing financial year. It added that the liquidity package of Rs 90,000 crore announced by the government last month offers a breather and will help state power distribution companies (discoms) settle a significant portion of their overdue bills to generating companies.

However, the agency opines that structural reforms have become critical to survival of discoms. One of the reasons for this is that with power demand weak and cash losses high amid the COVID-19 pandemic, discoms would end up owing lenders a staggering Rs 4.5 lakh crore by the end of 2020-21, 30% higher than that in the last fiscal. This would considerably deteriorate the credit profiles of discoms.

“Higher costs and constrained cash inflows amid declining demand mean the per-unit operating gap of discoms will widen to 83 paise per unit by the end of this fiscal. In other words, cash losses this fiscal may almost double to Rs 58,000 crore over last fiscal, despite higher subsidy support from state governments,” Manish Gupta, Senior Director, CRISIL Ratings noted.

This outlook is based on a study of 34 state discoms (from 15 states), which account for over 80% of India’s power demand. The study states that only one in five discoms is capable of servicing debt through own cash flows and budgeted subsidies.