While power generation units with combined capacity of 40 gigawatts (GW) are stressed and the sector is still grappling with the fall-out of several years of muted demand growth, state-run discoms dues to the power producers continue to rise.
According to data available with the power ministry s praapti portal, the discoms’ dues to 17 generators stood at `41,707 crore at February 2019-end, up a fifth from the level a year ago and 15% higher than at the end of August 2018. Of these dues, over half `23,879 crore to be precise are termed over-dues due to payment default of 60 days or more. The dues include those to independent power producers (about 57% of the total) and state-run utilities like NTPC, DVC and NHPC.
If the so-called regulatory dues of over Rs 17,000 crore are included, the outstanding amounts by the discoms to independent power producers alone would be a staggering Rs 40,770 crore. To make matters worse, private power producers are still waiting for payment of another Rs 6,865 crore from discoms as costs pass-through under the ‘change in law’ provision approved by the regulators.
Payment backlogs have been a perennial issue which continues to haunt the power generation industry as it waits to reap the benefits of the Union government’s actions to mitigate the woes of the stressed sector. Despite the UDAY scheme bringing in some improvement in the finances of discoms, most of them are still to abandon the practice of unduly delaying payments to power producers.
The situation has not improved in spite of the power ministry requesting the chief secretaries of all the states to direct discoms to clear their dues. Experts have pointed out that discoms frequently ask for renegotiation of the terms of power purchase agreements to find ways to escape penalties and late payment surcharges.
A high-level empowered committee (HLEC) on stressed power assets, formed under the chairmanship of Cabinet secretary in July, 2018, had proposed a payment security mechanism through which REC and PFC (now merged) can make upfront payment to independent power producers. However, the group of ministers comprising RK Singh, Nitin Gadkari, Suresh Prabhu, Piyush Goyal and Dharmendra Pradhan constituted to examine these recommendations hasn’t approved the payment security mechanism.
After the GoM examined the HLEC proposals, the Cabinet Committee on Economic Affairs, on March 7, approved certain recommendations, mainly relating to grant of linkage coal for short-term PPA. Even for the proposals ratified by the Cabinet, necessary follow-up action hasn’t been taken by the government. For example, even after making advance payments, power plants are not compensated for the short supply of coal on account of delays by Coal India or the railways. “This has led to 15 GW of generation units losing out at least Rs 2,500 crore since March 2017,” Ashok Kumar Khurana, director-general, Association of Power Producers, told FE.
The Cabinet had approved that to compensate such coal shortfalls in a particular month, power plants will be provided additional coal in the subsequent three months, but again, this was proved to be a non-starter. “The other Cabinet approval, which allows NTPC to buy power from stressed plants and sell it to discoms against PPAs for its under-construction plants, is also yet to materialse,” Khurana added.