How feasible is Indian market for power-producers; new hurdle awaits solar companies

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Updated: July 17, 2019 6:41:10 PM

Power producing companies have a new roadblock, making the Indian market a little more unfeasible for them. Distribution companies have held back a huge sum of money from the power-producers.

solar, wind, energy, discoms, renewable, coal, thermal, power projectsOver-dependence on imported coal due to poor quality of coal found in India, environmental issues and mining inefficiencies have troubled the power companies. (Bloomberg image)

Power producing companies have a new roadblock, making the Indian market a little more unfeasible for them. Distribution companies have held back a huge sum of money from the power-producers. Payment of Rs 21,198 crore to the power companies is still pending with the distribution companies, according to a reply in Rajya Sabha.

With a due of Rs 4,768 crore, Uttar Pradesh has topped the list of states with highest defaults by discoms, followed by Karnataka at Rs 3,256 crore. Similarly, the distribution companies have defaulted on a payment of Rs 13,820 crore to the wind and solar companies, according to Indian Renewable Energy Development Agency (IREDA).

Roadblocks for power-producers

  • Over-dependence on imported coal due to poor quality of coal found in India, mining inefficiencies and environmental issues in opening up of new mines have troubled the power companies.
  • Transmission inefficiency is another problem as almost one-fourth of what is generated is lost in transmission. 
  • Distribution inefficiencies have also disturbed the power companies because the companies can sell power only to the government agencies, which may either themselves distribute it to the end-users or outsource the same to private players. 
  • Non-payment or delay in payment has paralysed the power companies up to a certain limit.
  • And, the rampant power theft throughout the country has caused huge revenue losses for a long time.

“Renewable Energy tariff in India has come down significantly in recent years, which has resulted in too much pressure on margins of Solar and Wind developers. This has coupled with the delay in payments by discoms and has worsened the situation of Renewable Energy developers in India”, said Sushil Sarawgi, Director, Kor Energy India Pvt Ltd.

He also added that the pending payments with many discoms are stuck, not from three to four months, but for more than nine months in some cases. This has resulted in the loss of confidence of financial institutions to finance Indian solar and wind projects.

“Availability of land and power evacuation are the two main constraints in setting up of solar parks”, said the New and Renewable Energy Minister in the upper house. On the top of it, lack of payment from the distribution companies is poised to adversely affect the capacity addition capabilities of these companies, which has already come down drastically in the last two years from 9.3 GW in 2016-17 to 6.5 GW in 2018-19. 

At least 34 thermal power projects are stressed with an estimated debt of Rs 1.77 lakh crore, confirmed Raj Kumar Singh, MoS, Ministry of Power in Rajya Sabha.

 

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