The Association of Power Producers (APP) asked the Reserve Bank of India (RBI) for special relaxation for the power sector in its guidelines on when insolvency proceedings would be triggered.

The industry body said the stress in the sector is largely due to irregularity in payment from discoms, regulatory delays, and coal supply constraints, which are beyond the control of power firms.

In a letter written to RBI governor Urjit Patel, the APP said discoms delay regular payments by three-four months, and currently receivables to IPPs stand at about Rs 8,300 crore. Additionally, Rs 7,800 crore is stuck due to various delays in receiving orders from regulators. The IPPs are not compensated for the extra money they have to shell out to buy coal at higher prices due to insufficient supply (only 60 per cent of requirement) by Coal India.

The RBI recently said even a one-day default in debt servicing for accounts with exposure of over Rs 2,000 crore would warrant formulation and implementation of a resolution plan. If failed, within three months, the cases will have to go to the NCLT for insolvency and bankruptcy proceedings.

Last week, power minister RK Singh assured power industry representatives that he would speak to the RBI and the finance ministry about the new guidelines, and his ministry would formulate a methodology to promptly compensate the industry for any development which comes under the ‘change in law’ category.

The APP claims that the three infrastructure sectors — energy, telecom and steel — face different kinds of issues, and thus call for specific solutions according to problems. According to Ashok Khurana, director general of APP, “The system has to be tolerant for genuine difficulties, while coming down heavily on mismanagement and fraud.”