Editorial April 2019

After the approval of the HLEC recommendations on stressed assets last month, more positive news came in for private power producers this month.

The biggest reason for cheer for the sector was the Supreme Court striking down the RBI’s February 12 circular on the resolution of stressed assets. The power industry has welcomed the court’s verdict as it mitigates the threat of power companies going into the insolvency process as well as lends flexibility
to debt recast. To recall, the private sector has 34 stressed projects totalling 40 GW and a combined debt exposure of about Rs 1.74 trillion.

Meanwhile, the CERC has okayed the new tariff plan for Adani Power’s Mundra plant in Gujarat, a move, experts say, sets a precedent to raise electricity tariffs on account of the unexpected increase in the prices of imported coal. Another positive for IPPs is the higher tariffs (4 per cent higher) being discovered in the second round of PPA auctions concluded this month, compared to the first round. The latest auctions have also seen the full quantity on offer being subscribed.

These developments augur well for thermal power producers, given that a large number of private projects have been stuck due to financial and PPA problems and have been facing the risk of liquidation. More so, given that coal-based capacity additions have hit a slowdown. In 2018-19, a paltry 2,060
MW of coal-based capacity was added till February 2019. Annual capacity additions, which ranged from 15 GW to 21 GW till 2015-16, have reduced to 7 GW in 2016-17 and around 8.7 GW in 2017-18.

Whether the positive policy tone translates into a more hopeful outlook for the power sector is something that is being keenly watched.