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Easing Corporate Renewable Power Purchases in India

The Indian government has simplified rules governing the Open Access framework for the procurement and sale of electricity. Actual and timely implementation remains in the hands of state regulators. Regulatory uncertainties have deterred commercial and industrial customers from taking advantage of OA to buy power on medium- to long-term contracts.

Greater Access Positive for the Sector: Fitch sees the counterparty shift to C&I customers from weak state discoms as credit positive for power generators in general and renewable companies in particular, through potentially higher utilisation and tariffs, and timely clearance of dues.

Though Fitch views exposure to state discoms as a systemic risk, the discoms frequently try to renegotiate tariffs and delay payments. Uncertain OA Regulations, Hesitant Discoms: State regulators calculate OA charges to compensate discoms for use of their infrastructure and loss of revenue. The high charges are subject to uncertainties, as the fees and waivers, which are offered to encourage renewable power procurement, vary across states and over time. This uncertainty deters C&I customers from signing medium- to long-term contracts.

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