From the Viewsroom

An area of darkness

Richa Mishra | Updated on May 07, 2020 Published on May 08, 2020

Power sector needs liquidity relief in Covid times

The power sector is badly hit by politics — States versus Centre. If corrective steps are not taken immediately, the Finance Ministry would again find itself dealing with another set of non-performing assets (NPAs). The power sector needs a hearing. The political argument that private investment in power utilities must put up with business risk is not convincing, as Covid-19 is a black swan event.

The situation was bad even prior to Covid-19; post Covid it will worsen for want of liquidity. The players have been highlighting the precarious liquidity condition of the distribution and generating companies in view of the Covid-19 related restrictions and heavy fall in demand for power. Leaving no stone unturned for policy intervention or bailout package, the players have been knocking at the doors of the Prime Minister’s Office.

The need of the hour is to ensure that plants continue to supply power. For this, the sector argues that it is imperative that a liquidity window for distribution companies to pay their power dues and deferred payment mechanism for coal and rail freight is put in place. The situation has become grim in April; as revenue collections by DISCOMs have fallen by as much as 80 per cent, payments to generators have also crashed. With the lockdown restrictions continuing in many parts of the country, revenue collection figures of May could be worse.

Many generators have now reached a stage where they do not have money to buy coal, or pay salaries, transport and LTA charges. Once the coal stocks at the plants are depleted, they will have no option but to shut down the plant till their liquidity situation improves. Should power sector be allowed to plunge into darkness? Yes, thermal has been duly supported by gas, hydro and solar, but to ensure the country is not overtly dependent on one source for energy generation, a proper energy mix is needed, duly supported by policies.

Published on May 08, 2020

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