According to a recent report from Crisil, in case power distribution reforms are not undertaken advances of around Rs.56,000 crore, or nearly 12% of domestic financial institutions’ exposure to the sector, are likely to turn into bad loans.
Reports said the Indian financial institutions had lend Rs.4.8 trillion to the power sector and that the sum is likely to grow to Rs.7 trillion over the next three years.
Roopa Kuvda, managing director and chief executive of Crisil said that the loans will turn into non-performing assets if there are no proper actions undertaken in the next 18 months. Kuvda said that there some signs of reforms in the sector.
Reports from Crisil said that the availability and rising prices of fuel in the future has been challenging many power projects. It also mentioned that projects worth 56,000MW were being built in India.
Reports also said that the other major problems for the power sector were huge aggregate technical and commercial losses (AT&C) and the wide gap between average cost of power supply and actual realization. The average difference between actual supply of power and realization is around 86 paise per unit.
The report said that the losses suffered by power distribution companies have doubled from fiscal 2008-09 to around Rs.40, 000 crore by fiscal 2010-11.