Piling Up

Gencos under stress as discoms’ outstandings rise

A key reason for stress in the power sector has been the outstanding dues of discoms to generators. The outstanding amount stood at Rs 407.57 billion as of end-December 2018, according to PRAAPTI (Payment Ratification and Analysis in Power Procurement for Bringing Transparency in Invoicing of Generators). This was 24.13 per cent higher than the outstanding amount of Rs 328.33 billion in December 2017.

Across generation companies, the independent power producer (IPP) segment had the highest overdue amount (of over 60 days) of Rs 144.06 billion  from discoms at the end of December 2018 as against Rs 152.83 billion in December 2017. The IPPs with pending dues for the month of December 2018 included Adani Power (Rs 57.83 billion), GMR (Rs 16 billion), Sembcorp (Rs 10.63 billion), Tata Power (Rs 8.79 billion) and CLP India (Rs 6.55 billion).

Meanwhile, the second-highest overdue amount was for public sector generators NTPC Limited (Rs 81.52 billion), followed by NHPC Limited (Rs 13.87 billion). Overdue amounts to both these PSUs have increased over the past year. In December 2017, NTPC Limited’s outstanding dues stood at Rs 22.03 billion while NHPC had an overdue amount of Rs 5.43 billion.

  Further, the dues for other central sector generators, Damodar Valley Corporation, North Eastern Electric Power Corporation Limited and SJVN Limited were Rs 12.72 billion, Rs 2.88 billion and Rs 1.23 billion, respectively. The corresponding figures for 2017 were Rs 16.5 billion, Rs 1.76 billion and Rs 2.03 billion, respectively.

A look at the total payouts by distribution utilities (see graph) from January 2018 to December 2018 shows that the monthly amount paid by distribution utilities is lower than the amount billed for each month, except March and September. Further, between January 2018 to December 2018, the overdue amount increased by 18.92 per cent, from Rs 215.53 billion in January 2018 to Rs 256.31 billion in December 2018.

The way forward

The High-Level Empowered Committee (HLEC), which was set up last year to revive stressed assets, put forth key recommendations to address the delays in payments. One of the issues the HLEC noted in its report was that delays in the payment of the applicable late payment surcharge (despite being specified in the PPAs) were hurting the viability of generators. For this, the HLEC recommended that the Ministry of Power should engage with the regulators to implement the late payment surcharge in the event of delay in payment by the discoms. This recommendation has recently been approved by the cabinet as part of the measures taken to resolve the stressed asset problem.

Another recommendation of the HLEC was that public financial institutions (PFIs) providing the bill discounting facility should be covered under a tripartite agreement. Earlier, PFIs had expressed their concerns over the poor financial health of some of the discoms and the risk of non-recovery from the discoms. Under the tripartite agreement, in case of default by the discoms, the Reserve Bank of India (RBI) may recover the dues from the account of the states and make payment to the PFIs. However, the power ministry has recently stated that implementing this measure requires RBI’s approval and hence, has been put on hold for now.

Net, net, a timely and speedy action plan needs to be implemented for addressing the outstanding dues problem, which is critical for the recovery of stressed assets in the thermal power generation segment.

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