Power lenders' shares zoom as states resolve to cut tariff-cost mismatch

The shares of power lending companies rose between five and 10 per cent on Thursday on reports of state governments’ unanimous decision to narrow the mismatch between tariffs and costs.

On a day when benchmark indices gained marginally, stocks of companies such as Power Finance Corporation (PFC), Rural Electrification Corporation (REC) and PTC India rallied and outperformed the main stock index.

On the Bombay Stock Exchange, shares of PFC were at Rs 18.80, up 9.67 per cent, to close at Rs 213.20. Likewise, stocks of REC and PTC India moved up 7.36 per cent and 5.95 per cent, respectively.
 

POWER PLAY STOCK MOVEMENT OF POWER LENDERS
Company	Thursday’s closing	Change (%)
PFC	213.20	9.67
REC	220.20	7.36
PTC India	81.95	5.95
All figures in Rs/share Source : Bombay Stock Exchange

The state power ministers’ conference on distribution sector reforms underlined the need for urgent steps to arrest and reverse the growing losses in power distribution.

The members agreed upon a set of measures to bring down the distribution losses. Accordingly, states would ensure that the distribution utilities file their annual tariff revision petition every year. It was also decided the state governments should automatic pass through in tariff for any increase in fuel cost by incorporating the same.

The members also agreed states should ensure payment of all outstanding dues from various departments of state government and institutions to the distribution utilities or release payments from the state budget directly.

Further, members also would consider converting loans due from the state governments to the distribution utilities as state government equity to ensure capital infusion and improvement in net worth of utilities.

“At a time when states’ electricity boards are struggling with their losses, the willingness showed by the states has stoked positive sentiments into the sector,” said an analyst who tracks the power sector. However, he further added presently there is no framework but only willingness. “It is too early to say whether the rally seen in the stocks on Thursday will sustain,” he added.