Ind-Ra expects payments to gencos remain uneven even after June 2020, based on the collection ability of the discoms. The overall situation could result in leverage increasing across the sector because of an increase in working capital borrowings
Amid lockdown to contain coronavirus infection, bill collections of discoms would have a significant impact and their power purchase cost may increase, a report by India Ratings (Ind-Ra) has said.
The report listed various factors such as low demand from industrial consumers; higher-than-expected aggregate technical and commercial (ATC) losses; higher dependence on direct collections from consumers compared to subsidy and inability to increase tariffs immediately, which would impact cash flow of discoms.
This could increase the leof the discoms, given that they would either delay payments to the generating companies (gencos) or resort to higher borrowings, it added.
Ind-Ra expects payments to gencos remain uneven even after June 2020, based on the collection ability of the discoms. The overall situation could result in leverage increasing across the sector because of an increase in working capital borrowings.
Ind-Ra had earlier stated its opinion that the pandemic could lead to the thermal plant load factor (PLF) falling below 55 per cent for FY2021, closer to the technical minimum standards, on account of a gradual ramp-up in industrial load and the already muted electricity demand witnessed in the pre-COVID scenario.
In its report on Thursday, the agency said it believes that discoms are likely to defer the payments to the gencos during 24 March 2020-June 30, 2020, which would offer considerable relief to the former, given the sudden drop in power demand.
The power purchase cost, which accounts for 60-70 per cent of the revenue, is the largest cost for the discoms; hence, a deferment in the same would enhance their liquidity at a time when collections are dwindling, as most discoms do not have a large percentage of online collections.
Source: PTI
