Notices have been sent to customers including Adhunik Group, Visa Power and Monnet Ispat and Energy
Bharat Heavy Electricals Ltd (Bhel) has sent legal notices to customers, including Abhijeet Group, Adhunik Group, Visa Power Ltd and Monnet Ispat and Energy Ltd, to recover 17,000 crore in dues.
“These are challenging times. We have taken a clear decision that if a customer is not paying, we will be stopping the work," an executive at the state-owned firm said, requesting anonymity. “We have also started issuing legal notices to the customers who are not paying."
Interestingly, Abhijeet Infrastructure Ltd, Adhunik Thermal Energy Ltd and Visa Power were named in the Comptroller and Auditor General of India report on allocation of coal fields.
The Central Bureau of Investigation has also charged Jas Infrastructure and Power Ltd, a part of the Abhijeet Group, JLD Yavatmal Energy Ltd and AMR Iron and Steel Pvt. Ltd in cases related to the allocations.
“We have demobilized the Abhijeet Group 1,080 megawatts (MW) Jharkhand power project site and closed the Visa Power project site," said the Bhel executive.
India’s largest power equipment maker has total dues outstanding of around ₹ 39,000 crore at the end of the quarter ended June, but around half of the amount will be paid to the firm only after Bhel meets specific milestones related to a project.
Chairman and managing director B.P. Rao had said in April that Bhel plans to recover most of the pending dues by July. Slowing growth, high borrowing costs and delays in securing regulatory approvals have hit many infrastructure projects in India, including power plants, hurting the ability of their promoters to repay creditors and vendors.
“Legal notices have been sent to Abhijeet Group, Adhunik Group, Visa Power Ltd and Monnet Ispat and Energy Ltd for recovering outstanding payments," a Bhel spokesperson said in an emailed response.
“In respect to the outstandings from these customers, it may be appreciated that issue of legal notice to recover our dues is action which has been taken after repeatedly taking up and persuasion, have not yielded the desired results to recover our outstandings. Further, since our outstandings were continuously increasing, we had to resort to stop further dispatches and Site activities and therefore issued a Hold notice," the Bhel spokesperson added.
“Even after this, since we have not realised our dues in the above instances, we have taken the next step of issuing legal notices to these companies to recover our outstandings."
Queries emailed to the spokesperson for Abhijeet Group on Thursday remained unanswered till press time.
“Bhel has not supplied erectable equipment from its various units in the required sequence. As a result, material at site is not usable till such time equipment required for immediate use is made available," a Visa Power spokesperson said in an emailed response. “The matter is being resolved through discussion with Bhel."
“There is no dispute with Bhel and the delay in payment was being sorted out," a Monnet Ispat executive said, requesting anonymity.
Bhel may stop supply of equipment and services to forthcoming projects due to non-payment of dues, Mint reported on 20 February. Bhel has also been regulating supplies to ongoing projects.
The dues are not a big concern, an Adhunik Group spokesperson said in an emailed response. “We are interacting with Bhel and we will clear all dues after completion of their job."
Although private sector investments in power projects increased exponentially to ₹ 98,283.23 crore in 2011-12 from ₹ 48,132.04 crore in 2009-10, it slumped in 2012-13 to ₹ 54,953.02 crore, primarily due to concerns about fuel security.
The worries stem from the fact that of India’s power generation capacity of 225,793.10MW, 67.61%, or 1,52,648 MW, is thermal power that requires gas or coal as a fuel. Also, a significant amount of planned capacity requires coal to fuel them.
The fuel shortages forced the government to allow generation utilities to import coal on their own or through state-owned Coal India Ltd, and pass on the extra cost as tariff increases to help restart stalled power projects. It is similarly working on a plan for gas pooling of domestic natural gas with imported liquefied natural gas.
“Power projects today are stalled not because of lack of credit but because of lack of supply of fuel and uncertainties with regard to coal pricing and power tariffs, towards which the government has recently taken some measures," K.C. Chakrabarty, deputy governor of Reserve Bank of India, said on 9 August.
The total gross outstanding loans of the Indian scheduled banks to the power sector was ₹ 4,038.22 billion as of March, according to central bank data. The power sector’s gross bad loans rose from ₹ 8.02 billion in March 2009 to ₹ 23.06 billion in March 2013.
Bhel has been struggling as orders from project developers are drying up. It has a manufacturing capacity of 20,000 MW per annum. Bhel secured 14,000 MW of orders in the 10th Plan period (2002-07) and 25,000 MW of orders in the 11th Plan period (2007-12).
The 12th Plan (2012-17) has been a dampener for the firm. It secured 2800 MW out of 4000 MW of orders floated in 2011-12. In 2012-13, out of 15,000 MW of orders floated in the country, Bhel got 8000 MW orders.
“We do not expect Bhel to bag more than ₹ 310 billion of orders in FY14 and over ₹ 350 billion in the medium term. While turnkey EPC (engineering, procurement and construction) orders can boost volumes, a higher proportion of these can depress margins further," J.P. Morgan Asia Pacific Equity Research wrote in a report dated 10 September. “Keeping book-bill relatively stable in our assumptions, the revenue growth afforded over FY14 and FY15 is a degrowth of 15% and 4%, respectively."
Bhel has orders worth ₹ 1.08 trillion on its book. No private sector power equipment maker has placed orders in 2012-13. Bhel’s order inflow rose 43% to ₹ 31,528 crore in the year ended 31 March. In comparison, it had received orders worth ₹ 60,507 crore in 2010-11 and ₹ 22,096 crore in 2011-12. “We have improved on debt collections and banks are paying directly to us rather than project developers. The outstanding has come down from ₹ 20,000 crore earlier," a second Bhel executive said on condition of anonymity. “We are not hesitant in stopping work."
While in the earlier arrangement, payment was routed through the developers, a direct disbursement will also help the lenders realize the stuck loans.
Ruchira Singh in Mumbai contributed to this story.