Govt will investigate whether private developers 'gold-plated' project costs to increase the debt component, thereby reducing their equity contribution, says power minister R.K. Singh
New Delhi: As part of its effort to address the problem of stressed assets in the power sector, the government will investigate whether private developers ‘gold-plated’ project costs to increase the debt component, thereby reducing their equity contribution, said power minister Raj Kumar Singh in his first interview after assuming charge.
The move comes at a time when India is trying to tackle the issue of stressed power assets. According to the second volume of the Economic Survey 2016-17, released in August, non-performing assets in electricity generation accounted for around 5.9% of the total outstanding advances of Rs4.73 trillion.
Mint reported on 4 December 2012 that several private project developers were dressing up their accounts while approaching banks for funding and inflating capital expenditure to increase debt value. Also, these developers placed equipment orders with manufacturers that quoted inflated order values and later transferred the balance back to the developers (bit.ly/2tR8lJZ).
“There is a need to investigate it. While looking at stressed assets, we will also look at whether any over-invoicing etc. has happened," Singh added.
A total of 34 coal-fuelled power projects, with an estimated debt of Rs1.77 trillion, have been reviewed by the government after being identified by the department of financial services. Issues faced by these projects include paucity of funds, lack of power purchase agreements, and absence of fuel security.
“The focus is on starting the stranded assets which can be run. Some (around 8,000 megawatts) have been cleared from the list of 36,000 megawatts. More will get cleared. We have called a meeting on 29 November to review the status," Singh said.
This comes in the backdrop of the recently launched Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) providing the architecture through which the government intends to reduce imports of fossil fuels, boost underutilized power plants and meet its climate change commitments. This, in turn, will reduce India’s energy imports and generate fresh demand for electricity.
“There was a committee here (in the ministry) along with the bankers to review the status. Shalini Prasad (additional secretary in the power ministry) was heading the committee…I believe that some more units can be revived. So, let us see," Singh said.
Any substitution of fuels for cooking, transportation and heating will improve India’s per capita power consumption of around 1,200 kilowatt hour (kWh), which is among the lowest in the world. According to the government, the Saubhagya scheme will require an additional 28,000MW of power, considering an average load of 1 kilowatt (kW) per household for eight hours a day.
Experts believe that the overall universe of stressed assets across fuel sources is 60 gigawatts (GW).
“The overall stressed thermal power generation assets in the private IPP (independent power producers) segment remain sizeable at 60GW, comprising about 26GW due to the absence of long-term power purchase agreements (PPA), about 12GW of stranded capacity due to non-availability of domestic gas and 22GW due to unviable tariffs in the PPAs due to capital cost escalation and fuel pricing issues for imported coal," rating agency Icra Ltd said in a report on Thursday.
Of India’s installed power generation capacity of 331,117.58MW, 58% or 193,426.50MW is fuelled by coal. Gas-based and hydropower projects account for 25,150.38MW and 44,765.42MW respectively.