The Association of Power Producers (APP) asked the Reserve Bank of India (RBI) for special relaxation for the power sector in its guidelines on when insolvency proceedings would be triggered.
The industry body said the stress in the sector is largely due to irregularity in payment from discoms, regulatory delays, and coal supply constraints, which are beyond the control of power companies.
In a letter written to RBI governor Urjit Patel, the APP said discoms delay regular payments by three-four months, and currently receivables to IPPs stand at about Rs 8,300 crore. Additionally, Rs 7,800 crore is stuck due to various delays in receiving orders from regulators. The IPPs are not compensated for the extra money they have to shell out to buy coal at higher prices due to insufficient supply (only 60% of requirement) by Coal India.
The RBI recently said even a one-day default in debt servicing for accounts with exposure of more than Rs 2,000 crore would warrant formulation and implementation of a resolution plan. If failed, within three months, the cases will have to go to the NCLT for insolvency and bankruptcy proceedings.
Last week, power minister RK Singh assured power industry representatives that he would speak to the RBI and the finance ministry about the new guidelines, and his ministry would formulate a methodology to promptly compensate the industry for any development which comes under the ‘change in law’ category.
The APP claims that the three infrastructure sectors – energy, telecom and steel – face different kinds of issues, and thus call for specific solutions according to problems. According to Ashok Khurana, director general of APP, “The system has to be tolerant for genuine difficulties, while coming down heavily on mismanagement and fraud.”
Recently, a report by the parliamentary committee on energy (which was invoked in the letter to the RBI) had called for a more pragmatic approach by lenders to private power producers, rather than applying RBI guidelines “mechanically”. Stressed assets in the power sector consist of 34 private power plants with an outstanding debt of Rs 1.74 lakh crore.
Though government-owned power generators are paid first, according to a report recently presented to the Lok Sabha by the standing committee on energy, dues of state-owned power supply utilities outstanding for more than 60-days payable to central government-owned power companies stood at `10,712 crore at the end of December 2017. Of this, pending amount to NTPC was Rs 1,756 crore.