Rating agency Fitch has assigned a stable outlook to the power sector on the back of some progress on fuel availability issues and the possibility of debt restructuring of seven state power utilities (SEBs).
In a report on the domestic power sector, Fitch said "The outlook for the sector remains stable in view of some progress on the fuel availability issue and the possibility of debt restructuring of SEBs in seven states."
The optimism is based on the independent power producers' attempt at securing coal supplies for their new generation capacities and Coal India has agreed to enter into fuel-supply agreements with 48 new projects, albeit with a very low penalty for non-supply.
The report also notes positively the government effort to facilitate a solution with a higher penalty clause that will kick in for supplies lower than 65 per cent of the contracted quantity from CIL.
"Though the resolution of the penalty issue in FSAs is likely in the near-term, coal supply issues will continue to affect investor interest in the sector," the rating agency said.
Similarly the government is in the advanced stages of formulating a plan for restructuring the debt of SEBs in Tamil Nadu, Uttar Pradesh, Rajasthan, Madhya Pradesh, Andhra, Haryana and Punjab.
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