New Delhi: India may be heading for power shortages during summerwhen the country will go to the polls as private producers have not been paid Rs 14,600 crore by state utilities which has created a shortage of funds, particularly for coal and rail transportation which requires advance payments.

Private producers have asked the government to intervene and make state utilities pay up so that they can build fuel stocks that are needed to meet summer demand, which is expected to surge. Industry sources said thermal power plant capacity of at least 15,000-mw is deeply impacted by the financial crisis as state power distribution utilities are faltering on timely bill settlements.

The sources said power plants are not able to purchase coal as payments to coal companies and railways are made in advance. The total overdue payments to generation companies from distribution companies are expected to be of the order of Rs 40,000 crore, of which receivables by private companies were at Rs 14,600 crore.

 

At a recent meeting on ensuring timely payments to generation companies, distribution companies of Tamil Nadu expressed their inability to settle the electricity bills. The major defaulter states include Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh. Besides claims worth Rs 18,000 crore are pending with electricity commissions for adjustments due to ‘change in law’ situations.

Power companies have written to power minister RK Singh to ask states to clear pending payables as further piling up may result in inability of generators to pay for coal and adversely affect power supply position. Association of Power Producers has also written to finance secretary Rajiv Kumar seeking banks’ support for working capital term loan for operating plants with under-recovery of fixed and variable costs. The companies have also demanded that banks should not hold disbursals for group exposure issues and support the assets as standalone assets.

Banks are not lending working capital to the power sector as they have reached sector and group exposure limits. The private power companies told the finance secretary that banks are demanding 2-3 times of security cover or 100% cash margins. APP director general Ashok Khurana said, “Large receivables from discomscoupled with reluctance of banks to extend enhanced working capital has resulted in severe cash crunch for already stressed private developers leading to inability of many to lift requisite coal quantities because of liquidity constraints.”

At a recent meeting of a committee under the Central Electricity Authority (CEA) to explore prepaid payments by state electricity distribution companies to power plants, Tamil Nadu distribution companies conveyed helplessness in clearing their dues. The committee was set up on February 1 to look into problems of delayed payments from discoms to power generators. The power ministry has also issued an advisory to states to shift to prepaid smart metering for all consumers in the next three years. The committee will study working capital cycles of power distribution companies and generation companies and identify gaps contributing to stress in the sector.

Cabinet secretary P K Sinha-led high-level empowered committee had last November suggested that financial institutions like REC and Power Finance Corp may discount receivables from discoms and make up front payment to generators. The financial institutions providing the bill discounting facility be covered by tripartite agreement so that in case of default by discoms, Reserve Bank may recover dues from the account of states and make payment to the funding agencies. The recommendations of the Sinha panel are being looked into by a group of ministers (GoM) headed by finance minister.