Power sector lenders to tell PM: Bring back regulated tariff regime

At the meeting, slated to take place shortly, the lenders are likely to raise the issue of impending bad loans in the wake of the inability of upcoming generation project developers to tie-up power sale arrangements. As a way out, these lending firms, have, in the agenda note for the meeting, suggested a possible shift back to the regulated tariff regime as an alternative to the current norms prescribing competitive bidding as the mandatory route for power procurement through long-term PPAs (power purchase agreements).

In the note circulated ahead of the meeting of the chiefs of ‘maharatna’ and ‘navratna’ Central public sector enterprises called by the PM, the state-owned lenders have categorically stated that the “generating companies are not able to tie-up the power sale agreements” and that “if PPAs are not executed, the borrowers shall not be able to generate the revenues and servicing of loans to financial institutions shall suffer resulting in the possibilities of bad loans”. The worries on the generation side is despite the recent intervention by the Centre aimed at sorting out the accumulated losses in the distribution sector.

The uncertainties on the fuel supply segment stem from a Prime Minister’s Office directive issued earlier this year that makes it mandatory for power project developers to have long-term PPAs in place

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