State-run entities delay payments beyond the acceptable 60-day window, hitting IPPs’ cash flows.
Despite the UDAY scheme-enabled savings of around Rs 15,000 crore in the year to March 2017 in their debt servicing costs, several state-run power distribution entities (discoms) are delaying payments to independent power producers (IPPs), leading to severe cash crush at many IPPs. According to sources, the total “pending amount” — payments delayed beyond a 60-day window — from discoms to seven IPPs at September-end was a whopping Rs 8,033 crore. With other IPPs also facing similar problems, industry experts estimate that dues of at least Rs 20,000 crore to these companies may have remained unsettled. The firms hit by non-payment of power charges by discoms include Adani Power, Tata Power, GMR Energy, JSW Energy and Vedanta. “The issue of large receivables is symptomatic of precarious financial situation and pervasive liquidity constraints of distribution utilities,” said Ashok Khurana, director general, Association of Power Producers (APP).
Agitated IPPs recently met Central Electricity Authority (CEA) officials to apprise them of their woes. As per the minutes of the meeting, reviewed by FE, IPPs said not only are the discoms delaying payment, they are also “pressuring” them to waive off interest on late payments. In certain cases, payment are made when IPPs, frustrated with chronic delays, agree to waive off the interest. Discoms are also trying various ways to keep their payment records clean despite the actual deferment of payments. In an instance, a discom would issue cheques just before the due date for payment and direct generators to encash them in installments staggered over a long period.
It was noted that government-owned power generators were paid first, rendering the financially stressed discoms incapable to pay private players on time. State-owned behemoth NTPC had earlier told FE that “the total days outstanding for NTPC was 39 days, which is well within the stipulated limit of 60 days for FY17.” The overall losses of all the state-run utilities in the country were Rs 62,025 crore in FY16, down from over Rs 66,022 crore in FY15.
A senior official from CEA told FE that the authority was still in the process of “collecting information on the dues, trying to figure out the exact pending amounts in consultation with APP.” The CEA will then give its opinion to the power ministry which is expected to come out with a resolution of the issue. According to the latest performance report released by the Power Finance Corporation, “the payables for purchase of power by utilities selling directly to consumers increased from Rs 1,25,784 crore as on March 31, 2015, to Rs 1,36,451 crore as on March 31, 2016”. The credit period for purchase of power increased from 120 days to 124 days in the same span.