Expressing concerns over coal stocks at the gencos depleting “at a worrisome rate” amid high demand for electricity, the Union power ministry has proposed a mechanism to ensure that the pass-through of imported fuel costs by gencos will be prompt.
The necessary tariff increases will be computed on the basis of the existing methodology for projects won on tariff-based competitive bidding, it said. The move is aimed at addressing the reluctance of thermal power stations to comply with the directive to adopt a fuel mix with 10% imported coal.
Though the pass-through was promised even earlier, gencos have remained sceptical of the viability of the mechanism and said full pass-through might not happen.
The ministry has now said in a statement that the matter was discussed with the Central Electricity Authority (CEA) in meeting held on May 20, 2022, where all stakeholders were present. Based on the discussions, it said, “the methodology has been revised to make it in line with the existing methodology being adopted by the CERC (Central Electricity Regulatory Commission)”.
It added that the mechanism for billing and payment for these plants shall be as per the PPA (power purchase agreement). However, it stated that to enable gencos importing coal with adequate cash flow, the provisional billing shall be done by the gencos on a weekly basis. Payment of at least 15% of the provisional bill shall be made by the procurers within a week from the date of receipt of bill, it stated.
This provisional billing and payment shall be subject to reconciliation during final billing and payment on monthly basis as per the PPA. In case of default of payment of 15% of the weekly provisional bill, gencos shall be free to sell 15% power via the exchanges. The gencos shall ensure blending with imported coal and maintain coal stock as per extant norms and the directions issued by the ministry from time to time, it stated. This direction is for coal imported for blending by such domestic coal-based power plants up to March 31, 2023.
Taking note of the fact that blending of imported coal to the extent of 10% not happening as stipulated, the ministry issued directions to all gencos on May 18 that if the orders for import of coal are not placed by them by May 31, 2022 and if the imported coal does not start arriving at power plants by June 15, 2022, the defaulter gencos would have to import coal to the extent of 15% (to meet shortfall of imported coal in Q1) in the remaining period up to October 31, 2022.
On Wednesday, the ministry proposed a fresh scheme to facilitate state-run electricity distribution entities (discoms) to pay up their dues to gencos, which at last count stood at a staggering `1 trillion. The move follows low level of compliance with its recent directives to discoms to clear the dues and the realisation that it largely resulted from a resource crunch with the discoms.
The scheme will allow payment of financial dues by discoms in up to 48 monthly installments.
It also includes a one-time relaxation wherein the amount outstanding (including principal and late payment surcharge) on the date of notification of the scheme will be frozen without further imposition of the surcharge.
If the scheme works without causing further default by discoms, it will enable gencos, many of which are facing huge liquidity crunch, to continue their operations in an uninterrupted manner.According to the power ministry’s estimate, discoms will save Rs 19,833 crore in 48 months on late payment surcharge. The dues stand at Rs 6,839 crore at present.
Ashok Khurana, director-general of Association of Power Producers said the scheme must have clause that gencos will be insulated from any burden that could arise from future default by discoms under the scheme.
