Power firms to seek weekly payments to manage coal imports
NEW DELHI: The Centre has asked power producers to bill electricity buyers every week to ensure adequate cash flow as costs surge because of higher imports of expensive coal, according to a power ministry letter seen by Reuters.
A scorching heatwave and the lowest fuel inventories at power plants in years have forced India to reverse a policy to slash coal imports. The move could put further pressure on power distribution companies that are saddled with debt and already owe billions of dollars to generators.
Power distribution companies had to ensure payment of at least 15% of the provisional bill to electricity producers within a week, the letter dated May 26 to power generating companies and state and federal energy officials read.
If power distribution companies default, the power producers could sell 15% of their output to electricity exchanges, the letter read.
The ministry was invoking an emergency clause in the federal electricity law to enforce the change in payment mechanism, according to the letter.
Power plants, most of which have long-term agreements with distribution companies to sell electricity at fixed rates, have been allowed to pass on higher costs due to imports.
India’s power tariffs, set by the respective states, are among the lowest in the world, as staterun distribution companies have absorbed higher input costs to keep tariffs steady. This has left many of these companies deeply indebted.
The companies’ strained balance sheets have consistently triggered delayed payments to power producers, often hurting cash flow and further investment in the electricity generation sector.
If the distribution companies pay on time it would benefit companies such as Adani Power, Tata Power, Reliance Power, Jindal Steel and Power, Torrent Power, and Sembcorp.
The government on Wednesday said it was working on a plan to liquidate financial dues of power distribution companies. The proposal would enable payment of financial dues in instalments, it said.