Payment Stress

Update on discoms’ outstanding dues

Despite the Atmanirbhar liquidity package offered to discoms for loans against their receivables, the overdue amount of states is still at high levels. As per the PRAAPTI portal, the monthly trends in discoms’ overdue amount to power producers registered a 24.05 per cent rise to Rs 1,404.26 billion in January 2021 as compared to Rs 1,131.96 billion in January 2020 and Rs 1,382.65 billion in June 2020 when the package was announced.

To recall, in the wake of the pandemic, a Rs 900 billion liquidity infusion for discoms was announced for loans at economical rates from the Power Finance Corporation (PFC) and REC Limited. This was later increased to Rs 1,200 billion. However, disbursals under the scheme have been slow. As per the Ministry of Power (MoP) data, loans of around Rs 1,355 billion were sanctioned as of March 2021, of which only Rs 463.21 billion has been disbursed.

A look at the status of power discoms’ outstanding dues…

Summary of outstanding dues

As per the PRAAPTI portal, 66 discoms owed 234 power generators Rs 1.25 trillion in overdue payments, spread across 22,768 invoices, as of January 2021.

Overall, IPPs accounted for 32.68 per cent of the total overdue payments in January 2021. The share of central public sector enterprises (CPSEs), state generators and renewable energy generators in the overdue amount stood at 32.35 per cent, 25.15 per cent and 9.82 per cent respectively. The outstanding amount to all power generators stood at Rs 119.48 billion at the end of January 2021. Of this, discoms paid Rs 21.58 billion as compared to a total billed amount of Rs 147.32 billion during January 2021.

State-wise, Rajasthan has the highest overdue payment of Rs 440.58 billion, of which Rs 392.03 billion has been overdue for more than 60 days. Tamil Nadu has the second-highest overdue payment at Rs 196.41 billion, of which Rs 182.14 billion has been overdue for over 60 days. Uttar Pradesh is at the third spot, with overdue payments of Rs 154.05 billion, of which Rs 124.91 billion has been overdue for more than 60 days.

Among Central PSUs, the overdue amount to NTPC Limited stood at Rs 172.91 billion, the Damodar Valley Corporation at Rs 75.79 billion, NLC India at Rs 65.87 billion, NHPC Limited at Rs 32.30 billion and THDC India at Rs 20.43 billion. Among private generators, discoms owe the highest overdue of Rs 293.89 billion to Adani Power, followed by Bajaj Group-owned Lalitpur Power Generation Company Limited at Rs 46.86 billion, Sembcorp at Rs 29.43 billion, GMR at Rs 24.44 billion and Tata Power Company Limited at Rs 23.53 billion.

Recent developments

In January 2021, PFC raised 31 per cent of its borrowing limit from Rs 900 billion to Rs 1,180 billion for 2020-21 to accommodate the moratorium granted to borrowers as per RBI guidelines so as to help the lender disburse more loans under the liquidity infusion scheme.

Earlier, in October 2020, PFC introduced a credit facility for discoms under the policy for offering a revolving bill payment facility to discoms/gencos for ensuring the early payment of dues to gencos/transcos/trading companies.

That said, clearing the outstanding dues to gencos has been a major challenge for the industry owing to arm-twisting by the state governments. Last year, in August 2020, IPPs such as Tata Power, Bajaj Energy, KSK and Hindustan Power declined a proposal by the Uttar Pradesh government that made the settlement of state discoms’ dues to them contingent on the producers offering tariff rebates for past supplies. Uttar Pradesh had received Rs 210 billion under the centre’s Rs 900 billion liquidity infusion scheme to clear its outstanding dues to IPPs till March 31. While the Uttar Pradesh government has used the funds to clear 50 per cent dues to CPSU generators (including NTPC), Powergrid and renewable energy plants, it has only paid 12.5 per cent of the outstanding to IPPs so far.

According to the state government, the move to offer rebates by IPPs was suggested since CPSU power utilities had already offered discounts to discoms. A similar request was put forward by the Tamil Nadu government in December 2020 as well. Tamil Nadu’s state electricity board asked IPPs to offer tariff rebates for past supplies if they wanted their past dues to be settled under the liquidity infusion scheme. The IPPs were asked to provide 50 per cent discount on late payment surcharge dues and 20 per cent discount on pending fixed charge amounts.

Conclusion

The government’s reform-linked distribution plan proposed in the union budget is intended to improve the operations and finances of discoms, which should help mitigate the gencos’ cash flow stress over time. However, only a meaningful improvement in discoms’ economics can benefit gencos via higher utilisation and timely clearance of dues.

Akanksha Chandrakar

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