Implementation of UDAY, NTP critical for power sector: Icra

Implementation of initiatives like UDAY scheme and amendments in the national tariff policy (NTP) is critical for the power sector, ratings agency Icra said.
"Given the concurrent status of the electricity sector in India, for these policy measures to have the intended impact of achieving 24x7 electricity supply along with increased sourcing from renewable energy (RE) sources, it is critical that timely and proactive efforts are taken by all the states and SERCs to implement the NTP," Icra said in a statement issued here.
Following the announcement of Ujjwal Discom Assurance Yojana (UDAY) in November last year for the financial turnaround of discoms, governments in 17 states have agreed in principle to participate in the scheme.

Within these, 10 states, accounting for about 45 per cent of overall debt on the books of distribution utilities as on September 2015, have signed MoUs with the Ministry of Power for implementation of the scheme.
Moreover, sustained coal production growth at 8.6 per cent in 2015-16 following a 6.9 per cent growth in FY15 achieved by Coal India is a positive for power sector, as it has led to a decline in dependence on the costlier imported coal.
"The power sector, however, continues to face challenges arising out of weak demand from state utilities leading to absence of fresh signing of the long term PPAs, slow progress in resolution of tariff compensation issues for the affected thermal IPPs and uncertainty on improvement in domestic gas availability," Icra said.

The agency further said with a fall in spot LNG price level, third auction round in March for subsidy scheme to use Regasified Liquefied Natural Gas (RLNG) in case of stranded gas based projects has witnessed negative bidding.
A negative price bid of Rs 0.03 per unit in turn implies net realisation at Rs 4.67 a unit, which is not sustainable.
"At a delivered LNG cost of USD 6.2 per MMBTU, exchange rate at Rs 66 and assuming a moratorium period on debt repayment, the average under-recovery in cash cost of generation is estimated to be Rs 0.15 per unit for such projects, which further remains exposed to variation in spot LNG prices as well as exchange rate," the agency noted.