Little gain from power packages
By Ashok Pendse
The Centre announced a package of Rs 120,000 crore through PFC and REC in 2020 under Uday, as also letters of credit (LCs) for payment guarantees, to bring down the amount outstanding from discoms to gencos. It is necessary to evaluate performance on these counts from PRAAPTI data. PRAAPTI data, provided by the discom/state government for central gencos, IPPs , and RE generators, is missing data on the outstanding owed to state gencos. So, for calculating gross outstanding to gencos, at least 25-30 % will have to be added to the PRAAPTI figures. The accompanying graphic shows the outstanding at the beginning and end of the month in 2021.
Few things become quite clear. Approximately Rs 17,000 crore in the month of March. And Rs 8,000 crore in September must have been released. So, only during these two months, the amount outstanding dipped. In all the remaining months, the outstanding amount only goes up—because the discom is unable to pay the power-purchase costs. This is compounded by the late-payment surcharge that keeps on mounting.
Even after the large central package, the outstanding amount increased by about Rs 600 crore from January to December. Thus, at the national level, there has virtually no impact of Uday.
In the light of the national scene, it is worth exploring whether there is any distinction between states depending on the ruling party. The accompanying graphic shows the outstanding in four states, Uttar Pradesh, Karnataka, Tamil Nadu and Maharashtra, in 2021.
As stated earlier, thanks to the amount released under Uday, the outstanding dipped in March and August/September. Else, it has been on the upward trajectory in all the states, irrespective of the party in power. Bear in mind the following facts. UP got almost Rs 11,000 crore in March, the highest for any state in any month. The outstanding for Tamil Nadu and Maharashtra figures are extremely high. If we add Rajasthan’s, then the three states’ outstanding is 50% of national figure. In Maharashtra, in March, the outstanding shot up by Rs 9,000 crore, likely because of a change in the law.
The states being unable to pay power-purchase costs, and the outstanding going up is the common theme. Gujarat is an exception to all this. Generally, they pay earlier than stipulated and hence get early payment discount. Also, even though Jammu & Kashmir is with the Centre, the outstanding goes up, and dips only when Uday money flows in.
Three major players supply most of the power, and hence, the outstanding owed to them needs looking into.They are Centre-owned (NTPC, NLC, DVC, etc), IPPs (Adani ,Lalitpur, DB Power, etc] and RE generators. As it can be seen from the accompanying graphic, the biggest beneficiary are the Centre-owned gencos, for whom outstanding decreased by 50%. IPP and RE gencos’ outstanding has increased by almost 35 %. In value terms, outstanding owed to RE gencos is almost equal to, and that of IPP gencos is almost twice, that owed to Centre-owned gencos. It appears that IPPs and RE generators are worst sufferers at the hands of discoms, while the Centre-owned gencos have been the biggest beneficiary.
Every month, gencos confirm to State Load Dispatch Centres that they have the LCs. This is for normally eight days of supply. So, legally, the condition is fulfilled. The question then is why is the outstanding going up. Discoms are paying within 12-18 weeks. Suppose a generator revokes LC. Then, it will get money for a maximum of one week of supply. It will have to go to the same discom for 11-17 weeks of payments. Obviously, the discom will make the situation tough for the genco. Suppose the genco stops supply and sale on exchange. At present, the tariff is Rs 3.50-4. On the exchange, it will be around Rs 2.5-3. So, generators have no choice but to get dragged into the discom mess. In practice, LC is not making any difference.Unless discoms become financially strong, this scene will continue, requiring continued Uday-like support. Also, support IPPs and RE gencos; else, they will add to the NPA burden.
The author is a power-sector regulation expert
Check the source here –Source, Financial Express.