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  1. Union Budget 2017: Economic Survey shows outlook grim for power producers

Union Budget 2017: Economic Survey shows outlook grim for power producers

A day before the announcement of the annual budget, the finance ministry, in its economic survey for 2016-17, said that private power producers in the country are likely to remain mired in the unfriendly commercial scenario.

By: | New Delhi | Published: February 1, 2017 5:01 AM
Listing a few impediments that private power producers have recently been grappling with, the survey said that there is scant sign on the horizon that Plant Load Factors and tariffs might improve. (Reuters) Listing a few impediments that private power producers have recently been grappling with, the survey said that there is scant sign on the horizon that Plant Load Factors and tariffs might improve. (Reuters)

A day before the announcement of the annual budget, the finance ministry, in its economic survey for 2016-17, said that private power producers in the country are likely to remain mired in the unfriendly commercial scenario.

Listing a few impediments that private power producers have recently been grappling with, the survey said that there is scant sign on the horizon that Plant Load Factors (PLF) and tariffs might improve.

Average plant load factor for thermal power plants in December for private power plants was at 54%, significantly less than the 63% recorded a year ago.(This means that private plants had generated 54% lesser power than their maximum potential.) Overall, thermal power plants throughout the country operated at more than 60% PLF in December – which is the threshold for commercial viability.

The survey said that companies need to sell the power they are producing at high tariff rates, but in reality, the opposite is happening. Electricity boards are buying more power from the cheaper spot market. Merchant tariffs for electricity purchased in the spot market have slid to around R2.5/kwh, far below the breakeven rate of R4/kwh needed for most plants.

The survey noted that cash flow for most private power producers falls far short of what is needed to service their interest obligations.

More than 60% of the debt owed by the private power producers is with companies having an interest coverage ratio less than 1, it added.

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