Terms of payment: Private gencos want Coal India Ltd to stop ‘favouring’ govt firms

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April 02, 2021 1:35 AM

At the end of February, receivables of CIL from power plants stood at Rs 25,013 crore, of which dues from IPPs were Rs 176 crore.

Receivables from NTPC were around Rs 5,550 crore and DVC was Rs 4,145 crore while the dues of the state gencos of Maharashtra, Uttar Pradesh and West Bengal were at around Rs 3,446 crore, Rs 2,965 crore and Rs 2,794 crore, respectively.Receivables from NTPC were around Rs 5,550 crore and DVC was Rs 4,145 crore while the dues of the state gencos of Maharashtra, Uttar Pradesh and West Bengal were at around Rs 3,446 crore, Rs 2,965 crore and Rs 2,794 crore, respectively.

Facing extreme liquidity crunch, independent electricity generators have sought a level playing field with state-run power producers in terms of making payments for fuel to Coal India (CIL). In a letter sent to the Union ministry of coal, the Association of Power Producers has asked the government to direct CIL to “strictly ensuring the advance payment mechanism for all consumers”, which will ensure that all coal customers are on the same pedestal.

“While the independent power producers’ (IPPs) coal programme is allotted only after the payment is received by the coal companies, the central and state gencos enjoy the benefit of full credit against their coal purchases from the same coal companies,” the letter, reviewed by FE, from power producers argued. At the end of February, receivables of CIL from power plants stood at Rs 25,013 crore, of which dues from IPPs were Rs 176 crore.

Receivables from NTPC were around Rs 5,550 crore and DVC was Rs 4,145 crore while the dues of the state gencos of Maharashtra, Uttar Pradesh and West Bengal were at around Rs 3,446 crore, Rs 2,965 crore and Rs 2,794 crore, respectively. “This illustrates the stark contrast in payment terms between IPPs and PSU generators – the already-stressed IPPs face exceedingly stringent terms for purchasing and lifting of coal, while the PSU generators get preferential treatment,” APP added.

CIL had implemented the usance letter of credit (LC) mechanism—in other words, banker’s credit— as an additional mode of payment, but sources said very few IPPs are availing the system as “there are difficulties in operationalising usance LCs because the system is complex”. A senior official from a private power company told FE that “CIL accepts usance LCs only from a limited number of banks” and “to avail usance LCs, the invoices need to be deposited to the banks within three days but CIL takes around a week to issue invoices”. The person, refusing to be identified, added that “with rising receivables from government entities, CIL is managing its working capital requirements by putting more pressure on IPPs”.

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