Both Reliance Infra and Tata Power closed Thursday's trade with good gains, which analysts believe was a thumbs-up more to the intent of DERC rather than anticipating any balance sheet boost.
The Delhi Electricity Regulatory Commission or DERC has revised electricity tariff in the city. The regulator has approved tariff hike of 8.32 percent for power discoms run by Tata Power and Anil Ambani-owned Reliance Infra . DERC has also given its nod to a 9.5 percent hike in power tariff in areas served by New Delhi Municipal Corporation (NDMC).
DERC officials said that the hike will offset a revenue gap of Rs 1,245 crore and would mean in a hike of 10 paise per unit for 0-200 units and 15 paise per unit for 200-400 units for consumers in the areas served by the three discoms.
Both Reliance Infra and Tata Power closed Thursday's trade with good gains, which analysts believe was a thumbs-up more to the intent of DERC rather than anticipating any balance sheet boost.
The DERC had to raise power tariffs to compensate for regulatory assets, which is roughly about Rs 20,000 crore odd spilt between both the companies. The regulator will have to double tariffs every year hereon for any meaningful recovery in regulatory assets.
Regulatory assets are non-cash assets recorded in the books of discoms in cases where the regulator does not raise power tariffs to compensate for higher costs. If the regulator is not able to raise power rates for any reason, the loss is classified as a regulatory asset that can be liquidated in future via tariff raises.
"If this mechanism is continued at least for the next three to four years, it will ensure that at least payment to the power companies, from which they are purchasing power, should not get affected. But for them to improve their balance sheet the tariffs overnight would have to double each year for at least next two to three years. This (will help in) significant cost under-recovery in each of these companies," IIFL's power analyst Harshavardhan Dole told CNBC-TV18 in an interview .
Posted by Sagar Salvi
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