Prospects for Indian power sector bleak, says Moody's

Last Updated: Thu, Mar 28, 2013 04:36 hrs
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Even as the power sector in Asia offers bright prospects, the outlook for India's power sector looks negative, according to a report by Moody's Investors Service.

The report titled "Asian Power Utilities (ex-Japan): Broad Stable Outlook; India an Outlier" says the outlook for power utilities in Asia will remain stable for the next 12-18 months, primarily driven by government and regulatory policy continuity as well as easing fuel prices.

However, it forecasts a bleak prognosis for India.

"Moody's sees the Indian power sector as an outlier because of continued inefficiencies across the value chain, spanning feedstock supply and power generation to transmission, distribution and retail," said Ray Tay, assistant vice-president at Moody's, in a statement.

While the fuel situation in the rest of Asia is more or less stable, India faces acute fuel shortage particularly for private-sector utilities, Moody's noted. Also, the weak financial health of state electricity boards adds to the mess as their payment defaults will have severe repercussions across the value chain, the report said.

The report - authored by Mic Kang, Moody's vice-president and senior analyst, Ivan Chung, vice-president, and Tay - covered the power sector in nine countries - China, Hong Kong, India, Indonesia, Korea, Malaysia, the Philippines, Singapore and Thailand.

"The policy pillars of governments and regulators across the region will ensure that the major power utilities will maintain their dominant or monopolistic positions, while independent power producers will benefit from reliable purchase contracts," said Kang in a statement.

According to him, the stable to declining trends for fuel prices are taking pressure off weak tariff systems, particularly for the major utilities in China, Indonesia, Korea, Malaysia and Thailand.

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