My One Academy: Power Transmission and Distribution (T&D) Sector -"The catch up game begins"

Thursday, December 5, 2013

CARE Research has published Report on Power Transmission and Distribution (T&D) Sector –“The catch up game begins”.

Key takeaways include:

CARE Research expects a gradual recovery in power demand with DISCOMs going slow on 1) implementing financial restructuring package (FRP), 2) buying power from the open market and 3) entering into fresh long term power purchase arrangements (by inviting Case-I/II bids).

CARE Research has analysed 11 states comprising of 30 DISCOMs. These states constitute ~80% of all-India power demand in the last three years and continue to dominate in the 12th Plan. While the power demand in these states grew at 5.9% CAGR in the 11th Plan (FY08-12),

CARE Research expects it to grow at 6.1% CAGR in the 12th Plan (FY12-17E). CARE Research expects an investment of over Rs1.8tn in Indian transmission system in the 12th Plan led by PGCIL. The inter-regional capacity stands at 31.8GW as on Sept 2013, which is estimated to reach ~66GW by the 12th Plan-end. CARE Research expects robust investments in T&D sector in the 12th Plan due to 1) PGCIL’s plan to incur a capex worth Rs1.2 tn during FY13-17, 2) state transcos incurring a capex of Rs600 bn and 3) distribution capex of Rs3.06 tn.

CARE Research believes that tariff hike alone can’t bailout the DISCOMs given 1) substantial Regulatory Assets on DISCOM balance sheets, 2) untreated gap which has left tariffs far from being cost reflective, 3) unsustainable levels of cross-subsidization with a slowdown in high paying subsidizing consumers (such as commercial and industrial) and 4) emergence of group captive model wheeling away high paying consumers.

CARE Research has developed a Proprietary Scoring Methodology for DISCOMs to comprehensively assess 30 DISCOMs based on four major parameters 1) state support, 2) regulatory environment and policy support 3) key structural parameters and 4) key financial parameters.

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