The delay in payments by distribution utilities has been an issue of concern for generation companies for a long time. Owing to their precarious financial condition, distribution utilities are often irregular in their payments to generation companies, which results in huge outstanding dues. In a bid to bring in transparency in the payments made/due by the distribution utilities, the power ministry has recently launched a web portal and an app called PRAAPTI – Payment Ratification and Analysis in Power Procurement for bringing Transparency in Invoicing of Generators. As per an official release by the Ministry of Power (MoP), PRAAPTI will capture the invoicing and payment data for various long-term power purchase agreements from the generators. This will help the stakeholders to access month-wise and legacy data on the outstanding dues of distribution utilities. The portal will also enable consumers to evaluate the financial performance of the distribution utilities based on the regularity of their payments to the generation companies. Besides facilitating the reconciliation of outstanding payments between the distribution utilities and the generation companies, the portal assesses various state distribution utilities based on their ease of making payments to various gencos.
As per PRAAPTI (accessed on June 21, 2018), the outstanding dues of distribution utilities to the generators stood at Rs 295.2 billion as of end March 2018. Some of the key highlights derived from the portal are:
Gencos with highest dues: Across gencos, the independent power producer (IPP) segment had the highest outstanding dues (of over 60 days) from discoms of Rs 111 billion, followed by central sector generators NTPC Limited (Rs 94.79 billion) and the Damodar Valley Corporation (Rs 24 billion). The IPPs whose dues were pending included Adani Power, CLP India, Jaiprakash Power, Tata Power and Sembcorp. Meanwhile, the dues for North Eastern Electric Power Corporation Limited, NHPC and SJVN Limited were Rs 2.06 billion, Rs 9.33 billion and Rs 7.47 billion respectively.
Best and worst states: Amongst states, the distribution utilities (licensees, state power management companies, electricity departments, etc.) of Jammu & Kashmir, Punjab, Haryana, Delhi, Uttarakhand, Rajasthan, Maharashtra, Assam and Sikkim are the worst performing in terms of ease of making payments to the generators. The distribution utilities in these states have significant outstanding dues. For instance, the J&K Power Development Department has not cleared any of its pending invoices for March 2018, and the outstanding amount at the end of the month stood at over Rs 28 billion. The best performing distribution utilities in terms of ease of making payments are Madhya Pradesh, Gujarat, Karnataka, Andhra Pradesh, Telangana, West Bengal and Odisha, amongst others.
Six-month payout trend: A look at the total payouts by distribution utilities (see chart) from October 2017 to March 2018 shows that the monthly amount paid by distribution utilities is lower than the amount billed for almost every month, except January and March. As a result, the net amount (over 60 days) owed to generators kept accumulating, increasing from Rs 140 billion in October 2017 to Rs 248.8 billion in March 2018.
Going forward, the Power Finance Corporation, which has developed the portal, plans to expand the scope of the website to include state generators and more IPPs, as well as cover commercial information that extends beyond the present invoice and payment details.
While PRAAPTI is a good initiative towards information dissemination on distribution utilities’ dues to all stakeholders and introduction of best practices for power purchase transactions, it does little to deter distribution utilities from delaying or making irregular payments. The need of the hour is better payment security mechanisms so that gencos are duly paid for the power they produce and can make regular payments to lenders, especially in the wake of rising stressed assets in the sector. To ensure this, the distribution utilities need to be financially stable and start working on commercial principles without state government interference. The latter need to pay for subsidies doled out to agricultural and below poverty line (BPL) categories well in advance to the distribution utilities so that they can efficiently manage their power procurement expenses and other payments. While the Ujwal Discom Assurance Yojana has managed to help distribution utilities cut their financial losses and instill financial prudence to some extent, there is still a long way to go.