No resolution in sight for seven stressed units with 7,410 MW capacity: Union power ministry

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August 16, 2021 5:30 AM

The Shakti scheme, which was framed by the government to provide coal linkages to stressed plants, helped in the turnaround of seven projects with a capacity of around 6,000 MW.

powerMandating ERCs to initiate tariff revision in case discoms do not apply for it in a specified time, and the timeframe of 90 days for ERCs to finalise or adopt tariffs can greatly help in improving the financial viability of discoms as well as generators.

Out of the 34 coal based power projects totalling 40,130 mega-watt (MW), which were considered ‘stressed’ by the government in March 2017, resolution of seven plants of 7,410 MW are unlikely to be achieved, the Union power ministry recently informed a parliamentary committee. Only 135 MW of the non-salvageable capacity has been commissioned, and the remaining projects are in their initial stages of development, with only land being bought for some of the units.

Steps taken by the government and lenders to address the stress in the power generation sector have helped as many as 16 coal-based projects with combined capacity of 19,240 MW to have either been completely salvaged, or near final resolution, the ministry said. Another 11 projects, with a capacity of 13,480 MW are expected to find a resolution either within or outside the NCLT framework. The cumulative outstanding debt of the projects which are yet to find resolution is pegged at Rs 1,04,408 crore, of which, the seven irredeemable projects have outstanding debt of Rs 27,868 crore.

Out of these seven plants, six projects are at very initial stage of construction and are currently totally stalled. These “have either been ordered to be liquidated or are heading towards liquidation”, the government informed the parliamentary committee. Five of these projects have no fuel supply arrangements, while two plants (1,050 MW KVK Nilanchal and 1,320 MW Lanco Babandh) have agreements with Coal India for parts of their total capacities. Three units (1,200 MW Essar Power Jharkhand, 1,050 Monnet Power Odisha and KVK Nilanchal) have tied up power supply contracts for only a fraction of their respective capacities.

Lack of adequate fuel supply and shortage of power purchase agreements (PPAs) were identified as the primary reasons for stress in the sector. A number of plants were planned without PPAs, keeping the lucrative rates of merchant power at that time. However, electricity demand did not rise as it was expected resulting in less than anticipate demand of power from the exchanges. To address stress in the sector, the government, in March 2019, had approved some recommendations of a high-level empowered committee, mainly relating to coal supply issues, payment discipline and sanctity of contractual agreements.

The Shakti scheme, which was framed by the government to provide coal linkages to stressed plants, helped in the turnaround of seven projects with a capacity of around 6,000 MW. In order to address the problem of lack of PPAs, the power ministry had notified a scheme for procurement of power from commissioned projects having untied capacity.

Nearly 2,000 MW capacity have already got relief from the scheme. Negotiations outside the Insolvency and Bankruptcy Code framework, enabled by a favourable Supreme Court verdict in April 2019 which declared the Reserve Bank of India’s February 12, 2018 fiat on mandatory insolvency and bankruptcy code timelines as ‘ultra vires’, also aided the resolution of some units.

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