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Crisil Ratings in its latest report has said that operating losses, denoted by the gap between average cost of supply (ACS) and average revenue realised (ARR) per unit of power, of 30 state power distribution companies (discoms) will remain sizeable at 40-45 paise per unit this fiscal despite a 15-20% reduction on-year. It said elevated cost of supply and subdued tariff hikes have kept operating losses elevated and led to an increase in borrowings to fund the losses. That, in turn, will keep credit profiles weak and discoms reliant on timely government support.
According to the report, there are multiple reasons for the slow growth in ARR. First, even at the national level, despite improvement, there have been delays in the release of tariff orders. For instance, discoms in 10 of the 36 states and union territories (UTs) witnessed delayed or no release of tariff orders for fiscal 2024 (14 states and UTs for fiscal 2023 and 22 for fiscal 2022). Second, regulatory support mechanisms such as automatic pass through have been implemented in only 15 states and UTs. Third, the improvement in billing efficiency has been slow and it remains below 90%, impacting the revenue of discoms and keeping the ACS-ARR gap at 40-45 paise per unit this fiscal. That said, it will be only the second instance of the gap narrowing below 50 paise per unit in the past five fiscals.
The report said while the operating losses are expected to slip from more than Rs 30,000 crore in the past two fiscals to Rs 25,000-30,000 crore this fiscal, they will remain large, leading to increased debt in balance sheets to fund the losses and keeping the credit profiles weak. That makes a continued improvement in subsidy realisation from state governments crucial for the discoms. While subsidy disbursements from states have been more than 100% and timely over the past three years, any dilution in state support or delay in subsidy realisations will pose downside risks to the estimates of operating losses.
MoneyWorks4Me rating and ranking of funds for SIP is available to subscribers only. Moneyworks4Me is not a rating and ranking agency, however it is required that users have a way of selecting funds and building a Portfolio. The method used by it are described below to enable users to understand the logic behind the rating and ranking Subscriber will find more details on this in the various content made available from time to time. In case you need more please write to besafe@moneyworks4Me.com
MoneyWorks4Me rates and ranks mutual funds based on the following data-driven system:
Funds ranking in screeners: Performance Consistency and Quality are two parameters used for ranking funds for SIP. The ranking as follows GG, GO, GR, OG, OO, OR, RG, RO and RR.
With the same color-coded funds, the one with the higher Average 3-year rolling returns (over 5 to 10 years), the number that appears in the Performance tag, ranks higher.
Here is the summary:
The third tag Upside Potential is not relevant for SIP. It is relevant for lumpsum investments in Mutual Funds.
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