"Aggregate accumulated losses of Indian utilities (state-owned) are estimated at over Rs 2 trillion as at the end of FY'12. About three-fourth of these losses were incurred over the last five years and these were funded mainly by borrowing from banks and financial institutions," Crisil Infrastructure Advisory, a part of Crisil, said in a report.
There are about 89 discoms in the country. The estimates come against the backdrop of precarious financial health of discoms raising concerns of default in the banking system.
The overall exposure of discoms to financial institutions is estimated to be Rs 2.6 lakh crore.
As per Crisil, power tariffs in India rose just under five per cent per annum in the five years ended FY'10. During the same time, per capita income grew by 13.4 per cent every year while household expenditure increased by 10.6 per cent per annum.
"This indicates that Indian consumers can bear higher tariffs and policy makers may have more flexibility to increase tariffs than they are currently exercising," Crisil Managing Director and CEO Roopa Kudva told reporters.
Kudva noted that current power tariffs are well below the rates of inflation.
She pointed out that if power tariffs had kept pace with other household expenses, utilities would have earned additional revenue of about Rs 950 billion in this period.
"Instead of making aggregate losses of Rs 870 billion, they would have made an aggregate profit of Rs 80 billion," Kudva said.
Going by Crisil estimates, the realised tariff as a percentage of power generation cost is 74 per cent compared to 80-90 per cent in some of the major developing countries.
The Indian power sector's dependence on imported coal -- more expensive than domestic fuel -- in recent years.
"The power sector's reliance on more expensive imported coal doubled from 7 per cent of coal-based power generation in FY 2007 to 15 per cent in FY 2012," it said.
Automatic tariff increases, reduction of Aggregate Technical & Commercial (AT&C) losses and timely payment of subsidies by governments to their respective discoms, are among the steps that can help in bettering the power sector, Crisil noted.
Source- Economic Times