BackGovernment signals help for power sector
Minister Piyush Goyal says government will focus on providing fuel, will meet bankers on resolving funding issues
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New Delhi: India’s new minister in charge of power, coal, and new and renewable energy, Piyush Goyal, on Friday signalled that the government was working towards offering relief to stranded assets—projects that have been left in the lurch for various reasons.
“We will focus on providing fuels. A national asset that has been created needs to be protected," Goyal told reporters after meeting representatives of the Indian power sector, including private sector firms.
Around 28,000 megawatts (MW) of thermal capacity in the country is stranded due to reasons such as the inability of the state electricity boards to purchase power. In addition, power plants have been operating below production capacity because of the inability of state-owned Coal India Ltd to meet demand and declining gas production from Reliance Industries Ltd’s D6 block in the Krishna-Godavari basin.
Some 9% of India’s installed power generation capacity of 248,509.63MW is fuelled by gas and 59% is based on coal.
“A lot of what we have discussed today will ease India’s problems," Goyal said.
India’s power sector is at a crossroads with the new government trying to provide relief to power project developers. The sector suffered a setback from the economic slowdown, high borrowing costs, delays in land acquisition and environmental clearances, and fuel shortages. This in turn resulted in a slowdown in the capital goods sector, with orders for power equipment drying up.
However, Goyal added that gas-fuelled power project developers had made their investments on the basis of certain “implicit" and “explicit" commitments on the availability of gas.
“There was never a commitment on price," Goyal said while adding that his government was not shirking away from any responsibility.
Mint reported on 11 February that the government was considering a bailout package for gas-based power plants that included ensuring that cash-strapped state power distribution firms continued to buy electricity from them after a scheduled increase in the price of gas kicks in, making available power from plants that are idling for want of the fuel, and a new repayment plan for a few other idle power plants. The draft cabinet note on gas-based generation has already been circulated by the power ministry.
The plan, which aims to revive the Dabhol plant of Ratnagiri Gas and Power Pvt. Ltd, will affect plants generating around 19,000MW of power, and cost around ₹ 5,677 crore—the amount of subsidy that will be given to the state distribution utilities to pay for costlier power.
Goyal said that he will be meeting with bankers on Monday to resolve the funding issues for the sector.
The government has been evaluating sops to power plants that would also bring relief to banks and financial institutions that have extended loans to them. These concessions include extension of the commercial operation deadline by a year, a move that helps debt repayments to be deferred as they normally begin after this deadline.
Other sops include providing an additional three years’ moratorium on repayment along with a waiver of penal interest.
In a related development, Goyal cautioned against developers forming a cartel and not bidding for so-called ultra-mega power projects (UMPPs) that are of the order of 4,000MW, where resources such as land, fuel and water linkages are identified and in some cases also provided to the developer quoting the lowest price.
Some developers have raised concerns about the new design, build, finance, operate and transfer (DBFOT) model, under which the projects will be transferred to electricity buyers at the end of the 25-year power purchase agreements.
“If anybody chooses to cartelize and not bid for UMPPs, then so be it. The government doesn’t form a policy for a certain set of generators," Goyal said, adding that the government was open to views and suggestions.
The Odisha and Cheyyur UMPPs, estimated to require an investment of around ₹ 25,000 crore each, are also being seen as a test case for the new DBFOT model, unlike the earlier build, own, operate model. This move has been criticized by the Central Electricity Regulatory Commission, India’s top power sector regulator.
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