Empowered Committee suggests pit-stop measures for stressed power units

Suggests various steps to improve coal supply; entrusts NTPC to assist units facing chronic coal crunch

 

The high-level empowered committee (HLEC), under the chairmanship of Cabinet Secretary P K Sinha to provide long-term solution for the stressed assets in the power sector, has suggested pit-stop measures for immediate issues.

Though the committee put the onus of most of the problems on the state-owned power distribution companies (discoms), it hasn’t issued a direction.

The committee delved deep into the coal supply issue. It has also entrusted state-owned NTPC to assist the units that are stressed due to lack of coal.  

“NTPC can act as an aggregator of procuring power through a transparent competitive bidding process from such stressed power plants. It can then offer that power to discoms against PPAs of NTPC till such time as its own plants/units are commissioned,” said the report, adding that in order to meet the fuel supply for such plants, the NTPC may use its own basket of linkages/coal blocks.

The committee also asked the ministries of coal and power to work together for resolving the coal supply issue and enable availability of short-term linkage coal for a minimum period (say three months). This it says would help the units selling power to states, which prefer medium-term power purchase agreement for 4-5 years than 25 years.

A K Khurana, director general, Association of Power Producers (APP), said the report was silent on their demand for allowing pass though of additional cost due to procurement of coal through e-auction. Power companies turn to eauction in the absence of long term coal supply agreement with Coal India. “It is imperative to meet the progressively increasing coal deficit. The delay is resulting in under recovery of fixed cost and impairing the ability to meet debt service obligations,” he said.

With regards to improving the sale of power, the report suggested sale of old and inefficient thermal units, non-cancellation of PPA in case of delay in commissioning of plants. It, however, has not indicated any plan of action for the discoms.  

To ensure payment security, the committee has recommended that financial institutions (FIs) such as PFC and REC provide the bill discounting facility. In case of default by the discom, the RBI may recover the dues from the account of states and make payment to the FIs, the report said. Currently, this facility is available to government-owned companies like NTPC.

The committee has asked the Ministry of Power to formulate a proposal for tri-partite agreement (TPA) coverage to PFC/REC for discounting bills of independent power producers for consideration of the Competent Authority. Banks such as the State Bank of India (SBI) can also examine such discounting arrangements through existing FRAC (Fractional Reserve Banking/Lending Finance) mechanism for consideration of the Competent Authority.

The Ministry of Power has also been asked to engage with the regulators to ensure that late payment surcharge is mandatorily paid in the event of delay in payment by the discoms.  

Khurana said the recommendation will help ease the stress, but no timeline has been specified for its implementation. “A timeframe for operationalising these recommendations would help in their expeditious implementation,” he said.