Power Ministry Offers Payment Clarity To Help Producers Meet Imported Coal Blending Target
The Power Ministry has directed power producers to achieve 10% imported coal blending target.
The Power Ministry has allowed generating companies to raise weekly provisional bills for coal imported under the mandatory blending requirement as it looks to shore up inventory when the nation faces an energy crunch.
The ministry has directed states and generating companies to achieve the 10% imported fuel target by June 15, according to a statement on Thursday. For states failing to meet the requirement, the blending target will be raised to 15% till Oct. 31.
The ministry said some generating companies aren’t willing to import coal for blending due to lack of clarity on compensation terms. The mechanism for billing and payment for these plants shall be as per power-purchase agreement and to enable generating companies importing coal with adequate cash flows, they are allowed to raise provisional bills every week, it said.
Payment of at least 15% of the provisional bill shall be made by the procurers (discoms) within a week of receiving the bill, it said. In case of a failure, the generating company shall be able to sell 15% power in the power exchange.
The problem is Indian non-pit head coal-based power plants have coal just 25% of the normative inventory, according to Rohit Natrajan, assistant vice president-research, Antique Stock Broking. The government, after going through the bout of fuel crisis, signals coal-based power plants to stock up to 100% of normative inventory, he said.
“This will at least avoid a hand-to-mouth situation, as we saw in April, leading to spike in spot electricity prices.”
Late Payment Surcharge Relief, Flexibility To Discoms
The Power Ministry also plans to offer distribution companies flexibility to repay pending dues over 48 months while freezing late payment charges to ease financial position of discoms.
The ministry is working on a scheme to offer one-time relaxation to discoms to freeze the outstanding amount, including principal and late payment surcharge, on the date of notification, according to a statement on Wednesday. These discoms would then be allowed the flexibility to pay the outstanding in up to 48 instalments.
Generating companies will benefit from assured monthly payments which otherwise were not forthcoming to them, it said.
The surcharge is levied on the payment outstanding by a discom to a generating company at the base rate pegged to SBI’s marginal cost of lending rate or MCLR. It’s applicable at base rate for the first month of default and increases by 0.5% for every successive month of delay, subject to a maximum of 3% over the base rate.
Delayed payments by a discom affects the cash flows of a generating company, which needs to make provisions for input supplies such as coal, the ministry said. Discoms had outstanding dues of Rs 1,00,018 crore and the surcharge of Rs 6,839 crore.
The new regulation is an attempt to reduce the risk for both gencos and discoms, Crisil Ltd. said in a note. For generating companies, especially the private ones, the monthly payouts would offer some working capital relief, even though the challenge on that count is way bigger, it said. The easing of surcharge would save Rs 2,000-2,500 crore for the top 15 power consuming states, it said.