Power ministry meets gencos, discoms, lenders to resolve payment issues: Sources

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The power and renewable energy minister RK Singh met power generation companies (gencos), discoms, and lenders, along with senior officials from different ministries on May 6 to work out a plan to resolve issues relating to non-payment of dues by discoms to increase power generations, especially from stressed units, sources told Moneycontrol.

The power distribution companies (discoms) owe gencos over Rs 1.1 lakh crore, which has hurt their cash flow and their ability to buy coal to generate power. The ministry met power generators after they said that they are not being paid on time and would not be able to pay for imported coal to scale up generation, as directed by the ministry.

“The ministry spoke to gencos, discoms, and lenders with the intent to resolve the payment issue. They have suggested that they enter tripartite agreements to ensure that discoms pay on time and bankers can help with working capital and line of credit to the gencos so that they can revive their units,” a senior official of one of the companies that attended the meeting told Moneycontrol.

India’s power demand hit an all-time high of 207.1 gigawatts (GW) on April 29, driven by a spike in demand from households amid an ongoing heatwave and a pick-up in industrial demand. While the demand continues to remain strong, power output has remained constrained due to lower coal output and rail transport challenges. According to the Central Electricity Authority, 89 of the 150 domestic coal-fueled units had critically low average stock as of May 5, which means they had less than 25 percent of their normal requirements.

The government has asked all imported coal-based power units to run at full capacity by invoking Section 11 of the Electricity Act, but the cash-strapped power gencos have raised concerns over their ability to buy expensive coal.

“In some cases, the ministry has told discoms to pay a certain amount from the overdue to gencos and to make monthly payments going ahead. If they fail to do so, gencos can sell power on power exchanges,” another senior official with a private genco said.

The resolution of payment issues among various stakeholders in India’s power sector may hold the key to meeting electricity demand amid rising temperatures, economic growth, and critically low coal stocks.

Read more on the power crisis on Moneycontrol, which is doing a special series ‘Power Shock’ on the ongoing power crisis that takes a deep dive into the complex problems of the sector.