The tussle between Narendra Modi and Nitish Kumar has created ripples in the electricity sector as Power Minister Jyotiraditya Scinida is scheduled to preside over a function that will contrast exemplary performance and credit-worthiness of Gujarat utilities with the mess in Bihar and Uttar Pradesh. ICRA and CARE Ratings have prepared the report 39 utilities from 20 states in a grading exercise conducted by the power ministry and Power Finance Corporation.
According to sources in the power sector, in the first-ever exercise to grade all state utilities for their credit-worthiness, all four electricity distribution entities from Gujarat have been rated 'A+' with Dakshin Gujarat Vij Company Limited (DGVCL) receiving the highest 89%.
West Bengal State Electricity Distribution Company and Maharashtra State Electricity Distribution Company received 'A' grade while 11 discoms from various states were assigned 'B+'. Ten entities with relatively poor performance and weaker financial health including one from Tamil Nadu were assigned "B", while eight utilities received C+ grade.
At the bottom of the heap, four discoms from Uttar Pradesh were awarded the "C" grade. An official who closely worked with rating exercise said the power ministry would have the last word in final grading and it may consult rating agencies if there are any changes.
Scindia will share final report with state energy secretaries, representatives of power bodies and top officials of financial institutions besides senior officials of ministry of finance and Power Finance CorporationBSE -4.43 % on Tuesday. A utility from Gujarat has been invited to make a presentation on best practices at that function. "There will be a presentation, but it is not yet confirmed if there will be any felicitation, which was initially expected," an official involved in the matter said.
Gujarat on top, Uttar Pradesh at bottom of discoms ratings list
Earlier, some states disagreed with the observations made by rating agencies in the draft report and shared more details to justify their points. "In July 2012, power ministry drew an integrated rating methodology for state power distribution utilities. In September, it mandated two rating agencies to evaluate 39 discoms. We shared our draft report with stakeholders and sought their feedback. Based on additional inputs, we submitted final report to the ministry on March 15," ICRA senior vice president SabyasachiMajumdar told ET. ICRA rated 20 utilities from Punjab, Uttar Pradesh, Bihar, West Bengal, Assam, Gujarat, Maharashtra, Karnataka and TN.
The power ministry has developed a unique model in consultation with financial institutions and rating agencies to devise a mechanism to incentivise distribution entities to improve their operational and financial performances. According to ICRA estimates, the losses of Indian discoms was Rs 80,000 crore in 2011-12, up from around Rs 63,500 crore in 2009-10. The rating exercise is aiming to reduce these losses of distribution entities. "The grading exercise for power utilities is different from conventional methodology applied for rating corporates where we look only at their capabilities to meet financial obligations on time. For grading utilities, we looked at both operational and financial capabilities of distribution utilities based on the data analysed for past three years," said Swati Agrwal, Regional Head at CARE Ratings that evaluated 19 utilities from 10 states.
Source- Economic Times