Even as there is incessant talk from top echelons in the ruling establishment of electrifying all villages in the country and making power available to each and every household for maximum duration in a day, the most crucial wheel required for making this happen and which must run smoothly at the desired pace has got stuck. The irony is that the political brass is only paying lip service to the urgent need for extricating it. The reference here is to the power distribution companies [discoms] – mostly owned and controlled by state governments which procure electricity from the independent power producers [IPPs], public sector undertakings [PSUs] viz. National Thermal Power Corporation [NTPC], Damodar Valley Corporation [DVC] etc besides their own...
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Category: Independent power producers (IPPs)
Discoms – burgeoning losses, continued populism
The increasing losses of power distribution companies [discoms] – firms which procure electricity from the generators and distribute to the consumers – have once again started haunting the states and union government alike. In 2015, the union government had orchestrated a financial restructuring package [FRP] under which over 75% of the outstanding debt about Rs 400,000 crore of discoms was taken over by state governments whereas for the balance 25%, they were allowed to issue bonds – backed by sovereign guarantee – to raise funds at concessional interest rate. The FRP was intended to enable discoms start on a clean slate, reduce losses and eventually eliminate them. During 2016-17 and 2017-18, they did show significant reduction but during 2018-19, this...
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Shun populism, salvage discoms
During the financial year 2018-19, 31 State-run electricity distribution companies [discoms] are reported to have incurred financial losses of Rs 21,658 crore. Coming as it does after a declining trend in their losses during the previous two years [from about Rs 52,000 crore during 2015-16 to Rs 32,000 crore during 2016-17 and further down to about Rs 17,000 crore during 2017-18], this raises concerns. To understand the reversal during 2018-19, it is important to analyze as to why their losses declined in the previous two years. In November 2015, Modi – government had launched Ujwal DISCOM Assurance Yojna [UDAY] to revive the ailing discoms. Under it, they were given a financial restructuring package [FRP] that involved takeover of 75% of...
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Power producers at risk, courtesy ailing discoms
As per reports, power plants with investment of over Rs 300,000 crore are in jeopardy as the state electricity boards [SEBs]/power distribution companies [PDCs] have not yet paid dues of about Rs 60,000 crore for the electricity purchase made by them. The concern is understandable as with so much money locked up in receivables, it is nearly impossible for the generators to run their plants. The situation is particularly critical for independent power producers [IPPs] who account for half of the dues and run the risk of turning into non-performing assets [NPAs]. The current scenario is a continuation of a trend seen for decades whereby SEBs/PDCs – faced with substantial shortfall in their revenue from sale of electricity to consumers...
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Ailing discoms render industry uncompetitive
The uninterrupted supply of requisite units of power at competitive rate to industries helps them reduce the cost of production. This along with lower cost of other infrastructure such as transport, storage and handling etc can give them the strength to compete in the domestic and international markets. This will also enable them temper their resistance to multilateral trade agreements such as the Regional Comprehensive Economic Partnership [RCEP] – between the 10 members of ASEAN plus 6 countries outside the group viz. Australia, New Zealand, Japan, South Korea, China and India – which promise manifold increase in access to markets but are stymied by fear of low cost import consequent to elimination of customs duty mooted under these agreements. Yet,...
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More than meets the eye
In a power battle between the providers and consumers of electricity, the latter lose, yet again During the first decade of the 2000s, in a bid to boost power generation and to make it available at ‘affordable’ and ‘stable’ price to consumers, the then Government had mooted the idea of ultra mega power projects. Two such plants were bagged by Tata Power Ltd (TPL) and Adani Power Ltd (APL) under tariff-based competitive bidding (TBCB), each with an installed capacity of 4,000 MW and 4,620 MW, respectively. While the TPL is based entirely on imported coal, APL uses 70 per cent domestic and 30 per cent imported coal. Under long-term power purchase agreements (PPAs), they committed to sell to power distribution companies at...
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Power battles – the consumer loses, yet again
In a bid to give a boost to power generation in India and make it available at ‘affordable’ and ‘stable’ rate to the consumers, in the first decade of 2000s, the then government had mooted the idea of ultra mega power projects [UMPP]. Two such plants were bagged by Tata Power Ltd [TPL] and Adani Power Ltd [APL] under tariff-based competitive bidding [TBCB] each with installed capacity of 4000 MW and 4620 MW respectively. While, TPL is based entirely on imported coal, APL uses 70% domestic and 30% imported coal. The projects were committed to supply power to state electricity boards [SEBs]/power distribution companies [PDCs] at fixed tariff all through project’s operational life. The tariff in case of TPL was...
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Power NPAs – don’t bail out defaulting promoters
In a bid to resolve mounting non-performing assets [NPAs] of public sector banks [PSBs] in a time bound manner, on February 12, 2018, the Reserve Bank of India [RBI] had issued an order requiring banks to initiate resolution of stressed assets – the so called special mention account [SMA-2] wherein either the loan or interest is in default for 60-90 days. As per the above circular, as soon as there is a default in the borrower’s account with any lender, all lenders – singly or jointly – shall initiate steps to cure the default. The resolution plan [RP] may involve any actions/reorganization including, but not limited to, regularization of the account by payment of all over dues by the borrower entity,...
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Can UDAY herald a power boom?
The state electricity boards [SEBs]/power distribution companies [PDCs] occupy a pivotal position in the electricity landscape of India. Besides owning generation plants and transmission infrastructure/lines, they are engaged primarily in supply and distribution of power [own plus quantity purchased from independent power producers (IPPs)] providing last mile connectivity to homes, farmers, industrial units and business establishments etc. Maintaining SEBs/PDCs in a state of robust health is of paramount importance to ensure uninterrupted supply of quality power in requisite measure to the users, making timely payments to IPPs and suppliers of raw material such as coal [to keep their own generation stations running], ensuring proper upkeep and maintenance of the transmission/distribution infrastructure and timely servicing of loans taken from banks/financial institutions...
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Power projects – flirtation with public money
In the midst of public sector banks [PSBs] losing lakhs of crore due to the so called non-performing assets [NPAs] – a sophisticated nomenclature for sheer loot of public money by dubious businessmen/industrialists acting in collusion with pliable politicians and bureaucrats – one comes across reports of the ‘government nudging bankers to take criminal action against independent power producers [IPPs] that have inflated project costs’. The diktat is a follow-up to the new power minister RK Singh last year hinting at the government’s intent to investigate ‘whether private developers gold-plated project costs’. He had suspicion that IPPs inflated project costs to raise a higher amount of debt to cover their equity component—a practice called ‘gold-plating’. This has far reaching ramifications. Let...
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