Home / Companies / BSES gets a week to resolve payment crisis with NTPC

New Delhi: Power utilities BSES Yamuna Power Ltd and BSES Rajdhani Power Ltd, which cater to about 3.5 million residential, institutional and business consumers in the capital, are exploring ways to resolve a 1,300 crore payment crisis with state-owned power producer NTPC Ltd by 16 May, to avert a major power supply disruption.

A person privy to the talks said the Delhi Electricity Regulatory Commission, which sets power tariff for utilities, has been informed of the matter and has asked the parties to resolve the matter in a week’s time. BSES has an accumulated revenue gap of about 16,000 crore as on 31 March, because it has not passed on the entire cost of power procurement to consumers.

After NTPC on 5 May told the two units of the Reliance Infrastructure Ltd-owned power utilities that the entire 2,027 megawatts (MW) of power supply to them will be cut off from the midnight of 10 May for not paying up dues, the power distributors approached the regulator on Monday, seeking a tariff revision to bridge the gap between the price at which they procure power from NTPC and the tariff they are allowed to collect from consumers.

The regulator will meet representatives from BSES and NTPC at a meeting on 16 May to assess the progress, said the person quoted above.

The development highlights the distress in the highly regulated and loss-making power distribution business, which also pinches power producers, who are forced to give credit and often discounts to retain a power purchaser. Since electricity distribution is an infrastructure-intensive sector where it is difficult for more than one player to set up distribution network at the same place and cater to the same customer, any setback for a distributor is certain to affect the consumer. Also, a sudden cut of large amounts of power to one region could affect the stability of the transmission network.

“The root cause of the distress in power distribution business lies in the inability of state governments to muster courage and raise power tariffs as power generation and distribution costs continued to rise. That has led to most of the power distribution companies ailing, preventing the modernisation of equipment and networks, and creating a vicious cycle that they are now struggling to get out of," said Independent Power Producers of India, in a note on the power distribution sector.

Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay High court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.

Gireesh Chandra Prasad
Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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