Indian power generators in general and renewable companies in particular will benefit from the counterparty shift to commercial and industrial (C&I) customers from weak state-owned distribution companies, said Fitch Ratings.
The power projects will see higher utilisation and tariffs, and timely clearance of dues, the credit rating agency said.
The Indian government has simplified rules governing the Open Access (OA) framework for the procurement and sales of electricity.
However, actual and timely implementation remains in the hands of the state regulators. Regulatory uncertainties have deterred C&I customers from taking advantage of OA to buy power on medium- to long-term contracts.
According to Fitch Ratings, almost half of the electricity generated in India is consumed by C&I customers. However, less than two per cent is purchased under long-term OA contracts with wind and solar power projects.
“The lower participation of C&I customers in the OA facility is a result of regulatory uncertainties. The composition, quantum and waivers for OA charges vary not only across Indian states but also over time in a state. In certain cases, the final procurement cost to C&I customers for conventional power under the OA facility may turn out to be higher than the cost of buying through the grid, which defeats the overall attractiveness of the OA facility,” Fitch Ratings said.