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Fitch Ratings has said in a new report that the widening losses at state power utilities could threaten fiscal consolidation in five States - Rajasthan, Tamil Nadu, Madhya Pradesh, Uttar Pradesh and Bihar.
“Losses in power distribution in these States exert additional pressure on State finances and it would be difficult for these States to achieve the fiscal consolidation targets established by the Thirteenth Finance Commission,” says Dr Devendra Kumar Pant, Director in Fitch's International Public Finance team.
Aggregate losses of state power utilities selling power directly to consumers (on subsidy-received basis) widened to Rs 44,470 crore (or 0.7 per cent of GDP) in 2009-10 from Rs 13,860 crore (0.3 per cent) in 2006-07, a CAGR (compounded annual growth rate) of 48 per cent.
Despite upward revisions of power tariffs by most State regulators in 2009-10 and 2010-11, Fitch said it believes that they would need to be accompanied by reduced aggregate technical and commercial losses (distribution losses) in order to have an impact on the financial health of the power utilities.
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