No quick fix for India's troubled power sector: S&P

NEW DELHI: Global rating agency Standard & Poor's (S&P) on Thursday said there is no "quick fix" for India's troubled power sector and stressed on the need for tariff reforms and improved fuel security.

"... there is no quick fix. India still faces long standing fuel shortages and states may impede the adoption of tariff regulations.

"Other issues include ongoing uncertainty around delays to land acquisitions and the ramp-up of coal production. Pricing and logistical issues also persist," S&P said.

S&P stressed that greater push for state regulators to implement model tariff guidelines could have significant benefits for the development of India's power sector.

Adoption of tariff reforms is likely to improve the credit quality of distributors over next two-four years and that would have a "knock-on effect for the industry as a whole", said S&P's credit analyst Rajiv Vishwanathan.

Stating that the sector is reaching a turning point, he noted that moves to improve fuel security would also create a more conducive operating environment for companies.

The power sector that has embarked on ambitious capacity addition plans is grappling with multiple woes, including acute fuel shortages, high coal prices and poor health of distribution companies (discoms).

In recent weeks, the government has unveiled various proposals including duty exemption for imported coal and LNG as part of efforts to ease the stress on the power sector.