Mercom Exclusive: India Power Utilities Performance Ratings – Some Improve, Some Don’t

May 22, 2017


According to the latest “Integrated Rating for State Power Distribution Utilities” report by the Ministry of Power, the four Gujarat state power distribution utilities (DISCOMs) have emerged as top performers for the fifth year in a row. Tripura has replaced Meghalaya at the bottom of the rating table.

Out of the 41 DISCOMs rated, five received a rating of A+ (up from three), six were rated A (no change), eight utilities were rated B+ (down from 10), 10 received a rating of B (up from eight), five utilities received C+ ratings (down from eight), and seven DISCOMs were rated C (up from five).

Of the five DISCOMs that received A+ rating, four are from Gujarat and one is from Uttarakhand. The bottom rung included Meghalaya, Uttar Pradesh, Tripura, Manipur, and Jharkhand DISCOMs. The Ministry of Power formulated an Integrated Rating Methodology in July 2012 for evaluating the performance of State Power Distribution utilities on a range of operational, financial, regulatory and reform parameters. The rating covers 41 state distribution utilities spread across 22 states. The Investment Information and Credit Rating Agency (ICRA) and Credit Analysis and Research (CARE) are the designated credit rating agencies.

The evaluation parameters cover current levels of performance as well as relative improvement from year to year. The operational and reform parameters include AT&C losses, efficiency of power purchase cost, customer interface, and carry weightage of 47 percent. The financial parameters include cost coverage ratio, payables, receivables, and timely submission of audited accounts carrying weightage of 33 percent. External parameters relate to regulatory environment, State Government subsidy support, and carry assigned weightage of 20 percent.

Most of the improvement has been attributed to reduction in debt levels due to states joining the Ujwal DISCOM Assurance Yojana program. The interest costs of states and union territory DISCOMs that have joined the UDAY program have been reduced by Rs.119.89 billion (~$1.83 billion). This has led to performance of DISCOMs increasing and improved ratings. However, if power tariffs aren’t increased annually based on costs, debt will continue to pile on.

Cost coverage ratio for most entities remained low (<0.90) due to substantial increases in expenses and non-cost reflective tariffs. Gujarat and Himachal Pradesh were the best performers on cost coverages. Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO), Kanpur Electricity Supply Company Limited (KESCO), Madhyanchal Vidyut Vitran Nigam Limited (MVVNL), and Jodhpur Vidyut Vitran Nigam Limited (JDVVNL) showed more than a 15 percent improvement on cost coverage. Of the rated DISCOMs, 26 showed an improvement in their aggregate technical & commercial (AT&C) loss levels compared to the previous year. Twelve DISCOMs got their AT&C loss levels below 15 percent during 2016 as compared to 10 DISCOMs during 2015.

These ratings enable government and lending institutions to better understand the operational dynamics of the power distribution sector but these should not be mistaken with credit ratings. DISCOM financials are the single biggest risk factor when it comes to the development of renewable energy.

Here is a snapshot of states that have significant amount of solar installations –


As of Q1 2017, Cumulative Solar Installations: 1,721 MW, Under Development: 806 MW, Tenders Pending: 750 MW

Rajasthan DISCOMs

The three Rajasthan utilities including, Jodhpur Vidyut Vitran Nigam Limited (Jodhpur DISCOM), Ajmer Vidyut Vitran Nigam Limited (AVVNL), and Jaipur Vidyut Vitran Nigam Limited (Jaipur DISCOM). The Jodhpur DISCOM received an improved rating of B (up from C+). The other two are rated C+ for a state which is number one in terms of solar installations.

In Rajasthan, all three DISCOMs have poor billing efficiency ranging between 68 percent to 76 percent. High power purchase costs of Rs.4.38 (~$0.068) is a major concern. The DISCOMs are also troubled by interest costs and defaults.

In the recently conducted 250 MW Bhadla Phase-IV Solar Park auction, the solar tariff has fallen below Rs.3 (~$0.046)/kWh, which is a good sign for these DISCOMs.

In a Mercom in-depth report on payment delays from March, the number of industrial consumers of electricity in Rajasthan has gone down drastically. There is a preferential tariff for industrial consumers in the state, which is lower than the average industrial power price in India. With the decline in the number of consumers and revenues, it has become an inhibitor in making payments, according to the Jaipur DISCOM. According to developers, payments in Rajasthan are delayed by about three months but the situation is reportedly improving.

Tamil Nadu:

As of Q1 2017, Cumulative Solar Installations: 1,578 MW, Under Development: 511 MW, Tenders Pending: 1,117 MW

Tamil Nadu DISCOM

The sole Tamil Nadu utility, Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) has been rated B. The state is showing signs of improvement after joining the UDAY program. Last year TANGEDCO received a rating of C+.

The TANGEDCO is involved in most of the project tendering in Tamil Nadu which led to the utility commissioning various power projects, thereby reducing its cost to purchase power. The TANGEDCO has good collection efficiency, which when added with the state joining UDAY, led to a higher ranking for the utility. However, TANGEDCO still has the worst reputation when it comes to payment delays and curtailment. Recent TANGEDCO tenders have received tepid responses even in a market where developers are desperately looking for projects to build.

In March, TANGEDCO told Mercom that there are still some payment delays, especially for wind, but they are a thing of past. Tamil Nadu has finally joined UDAY and the TANGEDCO will try to create an enabling environment for renewables in the state. Payment delays of up to four months have been reported in Tamil Nadu.


As of Q1 2017, Cumulative Solar Installations: 1,142 MW, Under Development: 260 MW, Tenders Pending: 160 MW

Gujarat DISCOMs

All the four Gujarat utilities, Madhya Gujarat Vij Company Limited (MGVCL), Uttar Gujarat Vij Company Limited (UGVCL), Paschim Gujarat Vij Company Limited (PGVCL), and Dakshin Gujarat Vij Company Limited (DGVCL) have been rated A+. The state ranks third in solar installations.

Key strengths common to all four utilities include a consistent track record of profitable operations aided by cost reflective tariffs, healthy cash collections, adequate subsidy support from the state government, comfortable cost coverage ratio and capital structure, and healthy cash collections from the consumers. The only challenge faced by Gujarat utilities is the allocation of subsidies being lower than actual claim leading to increase in outstanding subsidies. In all, the four DISCOMs are owed Rs.186.56 billion (~$2.9 billion) in subsidies by the state government.

Of the four Gujarat DISCOMs, Paschim Gujarat Vij Company, suffers from AT&C loss of close to 24 percent.

Gujarat has the best ratings in India, yet there is hardly any solar project development in the state. Most of the installations happened five years ago when Gujarat solicited almost 1 GW of solar on a feed-in-tariff basis at an eye popping average tariff of Rs.12 (~$0.186)/kWh. Since then, solar development activity has dropped due to extremely high offtake bills.

Andhra Pradesh:

As of Q1 2017, Cumulative Solar Installations: 1,965 MW, Under Development: 1,048 MW, Tenders Pending: 1,755 MW

Andhra Pradesh DISCOM

Out of the two Andhra Pradesh utilities, the Eastern Power Distribution Company of Andhra Pradesh Limited (APEPDCL) has been rated A, up from B+ last year, and the Southern Power Distribution Company of Andhra Pradesh Limited (APSPDCL) has been rated B+, up from B last year.

Both the state DISCOMs have shown huge improvement. The AT&C losses of the Eastern Power Distribution Company of Andhra Pradesh has declined to 6.4 percent from 7.86 percent in the previous year. The Southern Power Distribution Company of Andhra Pradesh has shown an increased billing efficiency of 96 percent, but AT&C losses are yet to come below 7 percent. Both the DISCOMs pay more than Rs.4.50 (~$0.069)/kWh for procurement of power but supply the cheapest power compared to anywhere else in the country, which is a matter of concern.

According to the Eastern Power Distribution Company of Andhra Pradesh Limited, they provide the cheapest subsidized power to farmers anywhere in India, at less than 30 paisa (~$0.005) per unit. Farmers constitute close to 40 percent of their consumers. A lack of revenues because of this has resulted in payment delays. Solar project developers have reported payment delays of four months in the state.

Madhya Pradesh:

As of Q1 2017, Cumulative Installations: 904 MW, Under Development: 1,422 MW, Tenders Pending: 440 MW

Madhya Pradesh DISCOMs

Out of the three Madhya Pradesh utilities, Madhya Pradesh Paschim Kshetra Vidyut Vitran Co. Ltd. (MPPKVVCL) has been rated B+, up from B, last year. Out of the other two DISCOMs, Madhya Pradesh Poorv Kshetra Vidyut Vitaran Co Ltd., has retained a rating of B, and Madhya Pradesh Madhya Kshetra Vidyut Vitran Co Ltd.’s rating declined to C+ from B last year. The state has seen unprecedented solar installations and the four-rupee barrier was recently broken in the state in the Rewa solar park auction.

All the three state DISCOMs suffer from high level of AT&C losses that range between 23.65 percent to 31.29 percent. Low billing efficiencies mar the utilities; none of the three DISCOMs have a billing efficiency of even 80 percent. Low consumer metering levels are another concern of the three DISCOMs, out of which only one, Madhya Pradesh Madhya Kshetra Vidyut Vitaran, has more than 80 percent consumer metering.

Solar project developers have reported payment delays of up to 3 months, but the situation is improving.

“These ratings are a good snapshot but do not wholly reflect on-the-ground realities and what developers experience on an ongoing basis. Payment delays are still an issue and overall there is still a long way to go before DISCOMs are fixed.” said Raj Prabhu, CEO of Mercom Capital Group.

India State Power Distribution Utilities (DISCOM) Ratings