Power distribution companies trip up states' credit capacity

NEW DELHI: Bleeding power distribution companies threaten to trip up the creditworthiness of five Indian states in particular, Fitch Ratings said in a report on Monday.

The states include Rajasthan, Tamil Nadu, Madhya Pradesh, Uttar Pradesh and Bihar, which account for 70.6% of the power distribution losses in the country.

These states will have to consolidate faster to meet the deficit targets, a tall order in the current economic climate, Fitch international public finance team director Devendra Kumar Pant said while releasing the report on state power utilities and states' fiscal consolidation.

The losses incurred by state-run power utilities are treated as off-balance sheet items in state budgets, in the same way as food, fertiliser and oil bonds are treated in the union budget. "Losses in power distribution in these states exert additional pressure on state finances and it will be difficult for these states to achieve fiscal consolidation targets established by the 13th Finance Commission," Pant said.