Editorial February 2019

A key issue of stress for the power sector of late has been the staggering levels of outstanding dues of discoms to gencos. Latest government data shows that the outstanding amount (as per the PRAAPTI portal) of discoms, which stood at Rs 317.72 billion at the end of November 2017, have increased by over 27 per cent to Rs 404.7 billion at the end of November 2018.

The states that owe the maximum amount include Uttar Pradesh (Rs 60.75 billion), Tamil Nadu (Rs 36.79 billion), Karnataka (Rs 36.86 billion), Andhra Pradesh (Rs 28.87 billion), Rajasthan (Rs 22.17 billion), and Jammu & Kashmir (Rs 27.97 billion). These states take from 514 days to almost 547 days to make payments.

The most stressed gencos, which account for 57 per cent share of the total outstanding amount), are independent power producers with almost Rs 144 billion owed to them. The amount outstanding for the country’s biggest power producer, NTPC Limited, was the second highest (31 per cent) at Rs 76.35 billion.

Earlier, in 2018, the High-Level Empowered Committee’s (HLEC) report on stressed assets identified outstanding discom dues as one of the 10 reasons for stress in the power sector. Delays in the realisation of receivables from discoms impair the ability of project developers to service debt in a timely manner and lead to exhaustion of working capital, the HLEC noted.

While the power producers’ challenge of outstanding dues is unlikely to get addressed in the near term, a breather for the stressed assets on the distribution side this month has been the initiation of the second phase of the Aggregate Power Procurement Scheme, which envisages 2.5 GW of power procurement through reverse auctions. Last year, in October, the first phase of the scheme was implemented and resulted in PPAs of 1.9 GW being tied up.

While the timelines of the auctions are yet to be announced, it can be hoped that the process of revival of these stressed assets can be made smoother with such measures.