Privately-run power generators, which contribute half of India’s installed capacity, are plagued with a slew of problems. These include unrealised dues from State-run distribution utilities (DISCOMs), discrimination in granting fuel-linkages and power purchase/sales agreements (PPAs), and having to cope with stiff environmental norms.
On February 27, the Association of Power Producers (APP), a body of independent power producers (IPPs), in a letter pointed to the Union Power Minister that introduction of LC-based power purchase had stopped piling up of current dues since August 2019.
However, earlier dues amounting to ₹43,170 crore remain unrealised. A majority of these dues are piled up with a handful of States like Uttar Pradesh, Tamil Nadu, Karnataka, Rajasthan, Andhra Pradesh, and Telengana. The amount is increasing progressively due to addition of late payment surcharge.
“The stress caused by the pending payments has increased to almost unsustainable levels and many projects are on the verge of becoming NPAs,” APP pointed out, and requested the government for a short-term solution, till finalisation of another bailout package.
The new bailout package will be the fourth in the last two decades. The first such package came in 2001, followed by one in 2012. The first Modi government launched UDAY (Ujwal Discom Assurance Yojana) in 2015.
Barring some exceptions, all the packages failed to discipline the State government-controlled power distribution sector.
Non-payment of dues is not the only problem. In a recent petition before the Delhi High Court, APP alleged that IPPs were facing the double whammy of competitive bidding, both for fuel purchase and long-term electricity sales.
In contrast, the NTPC-led State sector gets fuel at notified price of Coal India (CIL) and sells electricity on “cost-plus” basis to DISCOMs.
APP pointed out that such discrimination is not merely against the original policy promises, but also against the November 2018 recommendations of the High-Level Empowered Committee headed by the Cabinet Secretary.
Pressure is also mounting to implement the improved fly ash utilisation norms and set up flue gas desulphurisation units as part of stiffer emission norms. While stiffer environmental mitigation norms are welcome, any such initiative would end up increasing the cost of generation.
The sad part is that DISCOMs are barely ready to pay for such electricity.