Discom rankings gain teeth as Centre links them to credit worthiness

Our Bureau New Delhi | Updated on July 16, 2021

ICRA and CARE are the designated credit rating agencies

Rankings of electricity distribution companies co-ordinated by Power Finance Corporation (PFC) will determine their credit worthiness, Minister of Power and New and Renewable Energy RK Singh said on Friday.

“If that discom is in the top bracket A+ then its cost of funds will be less not only for PFC but apparently from other financial institutions as well,” Singh said at the launch of the ninth Integrated Ratings for State Power Distribution Utilities.

“If it is rated C then most likely it will find it very difficult to get a loan. Unless and until it is loss-making, it draws up a plan for loss reduction, gets its State’s government’s approval on that plan, and files it with us, it will not be able to access funds at all,” he said.

PFC has drawn different interest slabs based on the rating of the discom, ranging from 9.5 to 10.5 per cent. The rating also determines how much exposure PFC takes on a particular discom and the security it seeks when giving out a loan.

In the latest rankings, four Gujarat discoms and one Haryana discom have been rated A+. “Integrated rating reflects the operational and financial health of the distribution entities based on the rating framework approved by Ministry of Power,” the ranking report said.

In the financial year 2019-20, total State discom losses reduced from ₹61,000 crore in the previous fiscal year to ₹38,000 crore, Singh said.

The ratings exercise presently covers 41 State distribution utilities spread across 22 states. ICRA and CARE are the designated credit rating agencies.

Published on July 16, 2021

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