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Power ministry tells PFC, REC to support imported coal-based, stressed units with short term funds

Around 7,600 megawatts of imported coal based-plants are not running as they would incur losses at the current levels of coal price.

May 11, 2022 / 08:38 PM IST
(AP Photo/Manish Swarup)

(AP Photo/Manish Swarup)

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The ministry of power has directed state-run power sector lenders, Power Finance Corporation Ltd (PFC) and Rural Electrification Corporation Ltd (REC) to help arrange short-term loans for a period of six months for imported coal-based power plants and plants that are undergoing the bankruptcy process to revive generation.

The ministry has been trying to get all power units, including stressed units, that are generating below full capacity or lying idle to produce power to supplement the current generation to meet the steep rise in demand for power. Around 7,600 megawatts of imported coal based-plants are not running as they would incur losses at the current levels of coal price.

“These directions would ensure that additional electricity is produced through imported coal and will be a net addition. Since domestic coal supply is constrained, therefore, it is imperative that all ICB (imported coal based) plants should run to meet the power requirements,” the ministry said in a letter to PFC and REC on May 11.

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 even as power units scrambled for fuel, leading to many states being forced to undertake power.

Moneycontrol had reported on May 7 that the power and renewable energy minister RK Singh met power generation companies (gencos), discoms, and lenders, along with senior officials from different ministries to work out a plan to resolve issues relating to non-payment of dues by discoms to increase power generations, especially from stressed units.


“To restart their operations, the ICB plants which are under stress or in NCLT need working capital to buy coal and start generating power. In view of the above, it is directed to take necessary action to arrange short term loans for a period of six months with adequate safeguards, for such plants at the earliest,” the ministry said.

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’s latest direction comes after the power generators said 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 government has asked all imported coal-based power units to run at full capacity by invoking Section 11 of the Electricity Act. The changes come into effect immediately and will be valid up to October 31.

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Rachita Prasad heads Moneycontrol’s coverage of conventional and new energy, and infrastructure sectors. Rachita is passionate about energy transition and the global efforts against climate change, with special focus on India. Before joining Moneycontrol, she was an Assistant Editor at The Economic Times, where she wrote for the paper for over a decade and was a host on their podcast. Contact:
first published: May 11, 2022 08:38 pm
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