A Covid blow to power producers as discoms stop payments

New Delhi: Covid-19 is expected to deliver a big blow to the power sector as distribution companies have stopped payments to power producers as state electricity departments are not taking coercive actions to recover bills from consumers.

This has put a question mark on recovery of payments from the current month by distribution companies and from the month of January (due in March) by electricity generators, industry insiders said. 

Also, some states have stopped releasing power subsidies, majority of which are released every year towards closing of the fiscal. “Of course for us or anyone in India, dealing with this unprecedented pandemic is a priority. This was unforeseen and might create temporary inconveniences across power and other sectors,” an official in Rajasthan government told ET. A senior bureaucrat in Uttar Pradesh said the state is focussed on providing continuous power supply, specially to districts that are facing lockdown to contain the spread of Covid-19.

Recovery of electricity dues by state discom stakes place in a big way in March. “Recoveries have been significantly impacted due to precautions being taken for Covid-19. State governments are also refraining from taking any coercive measures for recoveries and the situation is not likely to improve in the near future,” said an executive in a power company.

States have been paying monthly bills to power generating companies since August last year when the power ministry mandated maintenance of bank guarantees by discoms in favour of power plants. However, the accumulated dues have not been liquidated and are rising due to penalties. 

According to the Praapti portal of the Union power ministry, the outstanding amount of discoms stands at Rs 86,931 crore, of which Rs 76,063 crore is overdue. 

The crisis comes in the backdrop of the power ministry’s proposal to launch a six monthly installment scheme for liquidation of the dues. Amendments to Electricity Act 2003 and revised tariff policy are being considered by the Central government to evoke discipline in power discoms. Power Finance Corp and REC Ltd have approved stringent prudential norms for distribution companies. 

Association of Power Producers director general Ashok Khurana said policy interventions from the government are required to salvage the discoms and private power assets.

The companies have sought a moratorium of six months for payment of interest and repayment of loans. They have also asked that the Reserve Bank’s June 7, 2019 circular, which mandates action against single-day default, be set aside for six months. The companies have asked for raising working capital limits, reduction of interest rates, additional funds for projects under implementation among other things.

Source: Economic Times