The power ministry says Independent Power Producers (IPP) are anxious they might end up being declared defaulters for no fault of theirs, but merely because discoms are delaying payments to them, or because they don’t have power purchase agreements (PPAs) or there are shortages in coal supply, etc.
Power minister RK Singh is miffed with RBI’s new norms for red-flagging stressed exposure at the earliest and believes they are unworkable. Even a day’s delay in repaying a loan, RBI has said, would lead to the company being termed a defaulter. The power ministry says Independent Power Producers (IPP) are anxious they might end up being declared defaulters for no fault of theirs, but merely because discoms are delaying payments to them, or because they don’t have power purchase agreements (PPAs) or there are shortages in coal supply, etc. These concerns were expressed by the IPPs at a recent meeting with the power ministry. Singh’s concerns are decidedly odd given the minister told this newspaper he was serious about disciplining discoms. Should that be the case, the question of delayed payments to the IPPs should not arise.
When this newspaper pointed out that, at the end of FY17, only seven states and Union territories had managed to bring down their AT&C losses as per the UDAY target and that some states had reported higher losses, the ministry refuted this. It claims the trajectory of AT&C losses, which need to be brought down to 15% by FY19 as per UDAY, is on track, and that the UDAY states have managed to bring down these losses by 1% in FY17. Moreover, the ministry says the gap between the cost of supply and revenues has been lowered by 25%. It concedes that not all states have made equal progress. However, while it lists 16 states where the AT&C losses have come down, it doesn’t specify whether the targets were met. If the losses don’t come down to 15%, this will increase the cost-revenue gap and drive up the losses.
Indeed, if Singh is so confident about the performance of the discoms, he needs to ask them why they are not signing more PPAs with the IPPs? They don’t, typically, because unless losses are reduced and tariffs hiked sufficiently, it is cheaper for discoms to do load-shedding. So, instead of asking RBI to dilute its norms—if RBI were to do this for each sector, it could never frame norms—the ministry should ask regulators to ensure tariffs are raised on time. Singh, though, is also trying to push the states and, effective January 2019, the cross-subsidy—whereby industrial consumers pay a higher tariff to compensate for lower agriculture and household tariffs—will be capped at 20%. That will ensure electricity costs for businesses come down by about 14-20%. Also, discoms will be denied compensation for AT&C losses above 15% in tariff orders from 2019-20.
Moreover, starting that year, gratuitous load shedding would invite penalties. If discoms are not fixed quickly, the pressure on state budgets will also increase dramatically—states are required to absorb 10% of FY18 losses in FY19, 25% of FY19 losses in FY20 and 50% of FY20 losses in FY21.