With the crisis over non-payment of electricity dues by Uttar Pradesh Power Corporation (UPPCL) forcing two private power producers, Reliance Power and Lanco Infratech, to shut down four out of their six units, the Centre has come out with a helping hand and extended funds to the ailing state electricity board (SEB) to pay off its liabilities till March 2012. The loan of R1,558 crore extended by Power Finance Corporation (PFC) is part of the financial restructuring package (FRP) worked out by the Centre for ailing SEBs.

However, what is interesting is the fact that PFC has not handed over the loaned amount to UPPCL but has deposited it directly into the accounts of the debtors, including the two major producers and the co-generation companies, which had dues pending against the power they had supplied to UPPCL discoms.

Speaking to FE, an official of UPPCL said that PFC has credited the amount into the accounts of the debtors to clear the outstanding dues. ?With this loan, we have cleared the power dues till March 31, 2012, and the money has been directly transferred by the Power Finance Corporation into the accounts of the respective companies.?

While 90% of the payments has been used for clearing the dues of private companies including independent power producers and co-generation companies, 10% has been given to Uttar Pradesh Rajya Vidyut Utpadan Nigam (UPRVUNL), the state’s own utility company. ?The mandate of the loan was that we should first clear the dues prior to April 2012,? said a senior official of UPPCL, adding that now that a major chunk of the dues has been cleared, both private producers will restart the units they had shut down.

Out of the Rs 1,558 crore that has been directly deposited into the accounts of the debtors, the largest chunk is in favour of Lanco. While approximately Rs 590 crore has been deposited into the account of Lanco’s National Energy Trading & Services, Rs 177 crore has gone into the account of its Anpara C plant in Sonebhadra in Uttar Pradesh. Around Rs 408 crore has been deposited into the account of Reliance Power?s Rosa thermal power account while another Rs 270 crore has been given to various co-generation companies. Approximately Rs 155 crore has been given to UPPCL to clear the debts of UPRVUNL.

The bailout, according to experts in the power sector, was necessary to allay the fears of private sector power producers who were fast heading into a crisis of sorts, with their dues mounting and the ailing UPPCL pleading for more time until the FRP gets cleared by the Centre. ?Private sector power producers in Uttar Pradesh were under a cloud over non-payment of long-standing dues by the state electricity utilities. The situation had reached a stage when questions were being raised on whether the experiment of privatisation in the state?s power sector had failed as none of the private companies were willing to run the projects beyond a limit if payments were not made on time. With this intervention, that question had been temporarily put to rest but the issue needs to be resolved in the long term too for the companies to perform well,? an official of one of the generating companies said, on condition of anonymity.

While Reliance has shut down three of its four units of 300 MW each at Rosa due to non-payment of dues, Lanco has closed one unit of its 600X2 MW Anpara C plant due to low availability of cash to buy fuel. ?We expect both the companies to restart the units within a few days and once that is done, we will get around 1,500 MW of power, which would go a long way to meet the heightened summer demand,? the UPPCL official added.

?Yes we have received some money into our accounts directly. With this payment, we will restart building our coal reserves and will soon restart our second unit too,? said a senior official of Lanco, adding that the company IS still owed around Rs 400 crore by UPPCL, both on account of power trading as well as for generation at its Anpara C plant.

Reliance Power, too, has approximately Rs 1,000 crore dues still pending and an official said it hopes they will be cleared soon.