NTPC lights out!

Power sector stocks are in the red today, lead by NTPC. The PSU is down currently almost 9% at Rs.139.70, with a 4 times surge in volumes.

The stock, along with the others has plunged after the Central Electricity Regulatory Commission  (CERC) released draft regulations which will decide the multi-year power tariffs for 2014-2019.  As per the new tariffs being planned, power tariffs are to get cheaper, which is good for the people but not so good for the power companies. The draft also recommends removing the tax arbitrage under which companies like NTPC were allowed to charge a higher tax from customers. If this is removed, it could mean that NTPC could be burdened with Rs.500 crore per year which it charged as tax arbitrage. Also, CERC has not bowed down to industry demand for change of operating and maintenance expenses. This, the industry, especially NTPC was demanding to bring some relief in its costs. With that demand being rejected, NTPC once again could be impacted as it had under recoveries on these operating and maintenance expenses at around Rs.1000 crore.