Letters of credit for power supplies: UP seeks more time

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Published: July 22, 2019 2:05:27 AM

In the meantime, the finance department has also been advised to provide additional subsidy to meet the cash gap.

The UPPCL and its utilities owe Rs 22,000 crore to gencos, out of which they are defaulting on Rs 16,000 crore, which is equivalent to 5 months’ of payments.

The Uttar Pradesh Power Corporation and state distribution companies (discoms) have sought some time after a recent order from the power ministry made it mandatory for discoms and other utilities to provide letters of credit to the generation companies (gencos) as an assurance of payment in lieu of power supplies. The ministry’s move comes into effect on August 1.

The payment assurance can be given with either letters of credit (LCs) for power supplies or discoms need to pay in advance for the electricity they plan to purchase.

Senior officials in the energy department briefed chief minister Yogi Adityanath about the issue. According to a senior official who was privy to the discussion, while the state government is committed to help UPPCL in maintaining power supply, the chief minister has assured that he would request the central government to defer the date of implementation and also allow a phased rollout.
Citing Uttar Pradesh’s unique problem, the official said that post Uday transition, the financial position of the state discoms has not been satisfactory.

“UP has a peculiar consumer mix. Industry forms just 14-15% of our consumers, while the rest are domestic. It is not comparable to states like Maharashtra and Gujarat, which have an industrial consumer base of nearly 36%. It is easier to collect money from industries. Our biggest challenge is to collect revenue from domestic consumers, especially in rural areas, where our majority consumers are based, due to which our revenue realisation is low” he said, adding that at present, the department is able to collect only 55%-60% revenue from rural areas, as against 92% in urban areas.

The UPPCL and its utilities owe Rs 22,000 crore to gencos, out of which they are defaulting on `16,000 crore, which is equivalent to 5 months’ of payments.

While the state generating company, Uttar Pradesh Rajya Vidyut Utpadan Nigam’s dues are the maximum, at Rs 6,000 crore, the CPSUs dues are to the tune of Rs 4000 crore. The IPPs’ dues stand at Rs 1,050 crore, while the UP transmission Corporation’s dues are nearly 2,700 crore, the Jal Vidyut Nigam;s dues are Rs 600 crore and the renewables and cogeneration companies’ arrears stand at Rs 1,000 crore.

“Our cash gap every month runs into Rs 1,000 crore, mainly due to high cost of power and also due to the whopping Rs 4800 crores that the Corporation pays as stranded capacity charges every year. The chief minister has asked the department to pull up its socks and improve its collections. In the meantime, the finance department has also been advised to provide additional subsidy to meet the cash gap.

It is important to note that UP has gone all out to increase its customer base by way of Saubhagya, through which its maximum new connections have been in the rural areas, where the revenue collection is poor. “UP has a dual challenge. While on the one hand the Central schemes such as Power for All and 24×7 power has increased our base load, on the other we do not have the ability to collect revenue from rural areas. This is becoming a huge bane for us,” said another official, on condition of anonymity.

 

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