New Delhi: Moody‘s has upgraded the outlook for India’s power sector to stable from negative in view of surge in domestic coal production and likely improvement in discoms’ financial health due to UDAY scheme.

“We have changed the outlook for the Indian power sector to stable from negative, because the increased domestic production of coal will ease constraints on fuel supply,” the ratings agency said in its investors’ service report ‘Power Sector – Asia Pacific: 2017 Outlook – Rising Industry Challenges Are Manageable, Outlook Stable’.

In addition, the government’s debt restructuring of the financially weak distribution utilities through UDAY scheme will likely improve their financial capacity to make timely payments to power generators, it said.

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“In India, renewable generation could act as a complementary source of power rather than a competitor to thermal, owing to power shortages,” it added.

Moody’s Investors Service said the stable outlook for the power sector in Asia Pacific over the next 12-18 months is mainly underpinned by consistent regulatory returns and its expectation of manageable increases in fuel costs over the same period, as well as the absence of significant changes to regulatory environments.

“Transparent tariff-setting mechanisms will continue to benefit the regulated power utilities in Australia, Hong Kong and Singapore,” Moody’s Vice President and Senior Analyst Mic Kang said.

Thirty-nine (74 per cent) of Moody’s-rated power companies in Asia Pacific demonstrate ratings with stable or positive outlooks, mainly reflecting broadly unchanged fundamental business conditions, financial profiles consistent with its rating expectations, and/or the positive outlook on a parent’s rating.

The remaining 14 companies (26 per cent) — a majority of which are Chinese power companies and to a lesser extent Japan’s power utilities — have ratings which carry negative outlooks or are on review for downgrade.