Power distributors in five states impacting power sector: Fitch

Distribution companies (discoms) in five states - Tamil Nadu, Uttar Pradesh, Madhya Pradesh, Jammu & Kashmir  and Haryana - constituted 80 per cent of the total book losses of all discoms in the country in financial year ended March 2010.

In a new report, Losses in Indian State Power Utilities, Book losses in state power utilities are in turn concentrated (93 per cent) at the level of discoms, while power generation, transmission and trading companies account for only 7 per cent.

The weak financial profile of discoms is the primary cause of stress for state power units whose annual book losses had reached Rs29,500 crore in FY10, up from Rs7,000 crore in FY06.

"This means that under the "cost-plus" tariff, generation and transmission companies are able to push their costs to the discoms, which are unable to recover the same from their consumers", says Salil Garg, director in Fitch's Asia Pacific utilities team.

While the substantial increase in the book and cash losses of discoms is widely known, Fitch notes that such a macro view masks the presence of healthy and well-performing discoms.

States can be classified according to the book profits and losses of their discoms over FY08-FY10.