Economy

Prepayments to generators can lead to load shedding: Tangedco

Our Bureau New Delhi | Updated on February 19, 2019 Published on February 19, 2019

Vikram Kapur, Chairman and Managing Director of the Tamil Nadu Generation and Distribution Company   -  Bijoy Ghosh

Power distribution companies may resort to load shedding in the absence of enough cash, if mandated to make prepayments to power generators.

These comments were made by the Chairman and Managing Director of the Tamil Nadu Generation and Distribution Company, Vikram Kapur, at a meeting of the committee constituted to look into the issue of delayed payment by power distribution companies (Discoms) to generation companies (Gencos) and Independent Power Producers (IPPs).

Kapur said that the basic problem faced by Discoms is that revenue is not enough to meet the expenditure and that the working capital cycle per se is immaterial. According to the minutes of the meeting, this view was supported by ‘other members’ as well.

The meeting was chaired by Chairperson of the Central Electricity Authority, PS Mhaske, and attended by other CEA officials; representatives from power producers were also present.

According to the minutes of the meeting, Kapur said that the difference between average cost of power supply (ACS) and the average revenue realised (ARR) has come down after implementation of UDAY.

But the financial crisis of Discoms will continue till the ACS-ARR gap gets bridged fully. Though 75 per cent of the debt was taken over by State governments under UDAY, the debt has started increasing thereafter as State government have stopped support and Discoms have to borrow to support their operations, Kapur said.

He said that an equity infusion along with further push for UDAY is the solution. It was also pointed out that periodic tariff revision is not taking place contributing to the ACS-ARR gap in some States.

Kapur said that problems of renewable rich states like Tamil Nadu have increased significantly due to recent changes made by the CERC in the regulations regarding Deviation Settlement Mechanism.

According to Kapur, government departments/local bodies across States have ‘huge dues to Discoms and recovery of this amount will ease the financial difficulties of the Discoms,’ which in turn would facilitate payment to Gencos.

Kapur cited Odisha’s example where the State automatically deducts dues that local bodies owe and credits them to the Discom.

Published on February 19, 2019
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