Though the targets set were not met, the last two decades ? particularly the later one ? were marked by some revival of investor interest in the power industry, especially in the generation sector.
The momentum, however, was partly lost in 2012 as fuel shortages and political arm-twisting led to inadequate pass-through of costs, denting investors’ confidence. Incidence of payment defaults by distribution firms worsened the financial position of generation firms, forcing the Centre to announce another massive bailout package for the sector, involving a recast of outstanding debts of R1.9 lakh crore.
The power ministry has steered clear of the issue while conducting a review of standard bidding guidelines for procurement.
Unable to get power-procuring states to agree on a tariff hike necessitated by the recent increase in the Indonesian coal price, developers of Mundra and Krishnapatnam projects have gone into arbitration. Pending resolution of the dispute, investors have put on hold their plans. Meanwhile, another 55,000-mw generation capacity based on domestic coal is also facing the risk of default on power supply contract due to fuel shortage.
The result is that the quantum of electricity generation is not growing in proportion to capacity addition. For example, plant load factor (PLF), a measure of capacity utilisation of generating stations, fell to 68.27% during the April-September period from 71.20% in the same period last year. Plants received 30.6 million tonne (mt) of domestic coal during September as against a requirement of 34.4 mt, a 13% shortfall.
Coal India alone is not responsible for shortfall in coal supply to the power sector. The Railways, too, has to share the blame. The national transporter is hard-pressed to supply enough rakes on time for lugging coal from mines to the power plant.
During the June-September period, Central Coalfield, a CIL subsidiary, offered just 71% of the committed coal quantum to private plants. Of this, the railways lifted just 47%. In effect, these plants received less than 50% of required coal quantity.
?The power sector is currently facing a grim situation of coal shortages. Most of the private power producers? balance sheets are bleeding since they are unable to recover full fixed cost due to unavailability of fuel.
Even while the PMO agreed to lower the domestic coal supply level to 65% from the proposed 80% due to CIL?s production constraints, the ground reality is that domestic coal supplies to some of the IPPs in the last 6-8 months has been as low as 40% to 50%,? said Ashok Khurana, director general, association of power producers (APP), a body of private power companies.
While the coal ministry has canceled allocation of over a dozen captive coal blocks to the power sector on the ground of delay in development work, there is no idea when it will initiate bidding for new blocks. The ministry had earlier targeted to start bidding by December end but modalities are yet to be decided. Pending that, the ministry cannot launch bidding.
The central government’s flagship ultra mega power project scheme also languished as not even a single project was allocated during the year. There is little of hope of bidding being completed anytime soon.
The coal linkage committee for 13th Plan capacity addition programme has not been met so far. Since developers cannot award contract for implementation in the absence of fuel linkage, power equipment suppliers such as Bhel and L&T are facing crunch of new orders.
Accumulated losses of the state power sector are estimated to have crossed Rs.2 lakh crore this year.
Facing crunch, a majority of states increased electricity tariff this year. However, a big gap between SEB’s expenditure and revenue still remains and they are heavily indebted.
Loss-making SEBs in states like Uttar Pradesh and Tamil Nadu defaulted on payment for power purchased from private generators. A big amount on this account is still outstanding. Companies like PTC India, Lanco Power and Adani Power, which were selling power to these SEBs on credit basis, burnt their fingers. ?The private sector is in the doldrums due to cash flow problems,? said Shubranshu Pattanaik, senior director, Deloitte India.
Unable to buy power from the market, the SEBs turned to the Unscheduled Interchange ( UI) route to meet their electricity shortfalls. UI is sort of a credit-based market where a SEB draws excess power from the grid and payment settlement is made later with another SEB that forgoes its share of electricity. But there is a limit to that as there is risk of grid discipline getting compromised when frequency is low. That is the reason SEBs are penalised by the regulator for overdrawing power when grid frequency goes below a certain level.
However, in desperation to meet their electricity shortfalls, states like Uttar Pradesh threw caution to the wind and kept overdrawing power even after being warned by the Norther Region Load Despatch Centre. This led to grid collapse on two successive days in July and August, which threw half of the country’s population into darkness. The Centre has recently approved a R1.9-lakh crore debt recast plan for SEBs. However, it will take a while before its impact is felt on the ground.