Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Industry / Energy/  Cabinet offers relief to struggling power firms
BackBack

Cabinet offers relief to struggling power firms

Cabinet allows power producers to end supply contract with power discoms without breaking coal linkages
  • Cabinet also clears a new hydropower policy aimed at making power purchase from such projects mandatory
  • Power sector NPAs comprise around 5.9% of the banking sector’s total outstanding advances of ₹4.73 trillion. (Mint)Premium
    Power sector NPAs comprise around 5.9% of the banking sector’s total outstanding advances of 4.73 trillion. (Mint)

    NEW DELHI : New Delhi: The union cabinet has allowed power producers, saddled with 36,000 crore of unpaid dues, to end supply contracts with defaulting power distribution companies (discoms), as Prime Minister Narendra Modi's government, in possibly its last cabinet meeting, addressed a pressing concern for the industry.

    On Thursday, the Cabinet Committee on Economic Affairs approved recommendations made by a ministerial panel that allowed power generators to retain coal allocations linked to a supply contract even if the agreement is terminated because of payment defaults by power discoms.

    The cabinet also cleared a new hydropower policy aimed at making purchase of electricity from such projects mandatory and offered financial incentives to make hydropower tariffs competitive with those using rival fuel sources.

    The measures largely aimed at coal-fuelled power projects come at a time when power discoms have defaulted on payments to generation firms. The Modi administration believes that these steps will help ease some of the problems facing the sector. Non-performing assets (NPAs) in power generation comprise around 5.9% of the banking sector’s total outstanding advances of 4.73 trillion, according to the second volume of the Economic Survey 2016-17 issued in August.

    CCEA also approved coal allocations for short-term supply contracts.

    The cabinet on Thursday took steps to bring down power sector NPAs and announced a new hydropower policy in a bid to make tariffs competitive.
    View Full Image
    The cabinet on Thursday took steps to bring down power sector NPAs and announced a new hydropower policy in a bid to make tariffs competitive. (Mint)

    “Allowing domestic coal linkage for short-term PPAs (power purchase agreements) is positive for the independent power producers (with aggregate capacity of about 25GW who do not have long-term PPAs), also given the higher preference for short-term PPAs by many of the distribution utilities," said Girishkumar Kadam, vice-president and sector head (corporate ratings) at ICRA Ltd, in a statement.

    Briefing reporters on the decisions taken by the cabinet, power minister Raj Kumar Singh said the option of cancelling a supply contract in case of non-payment of dues by state-owned distribution utilities would offer flexibility to power generators. In the case of delayed payments, CCEA also made mandatory the levying of a late payment surcharge on discoms.

    Also read: Power minister rules out mega power sector consolidation

    A high-level panel, headed by cabinet secretary P.K. Sinha, set up to address the issues of stressed thermal power projects submitted its report in November, after which a group of ministers was formed to examine them.

    As part of the new hydro policy, the cabinet approved declaration of large hydropower projects as a renewable energy source, thereby making them a part of the renewable purchase obligation, which requires power discoms to purchase a fixed amount of renewable energy to cut dependence on fossil fuels.

    Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

    ABOUT THE AUTHOR
    Utpal Bhaskar
    "Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
    Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
    More Less
    Published: 07 Mar 2019, 06:41 PM IST
    Next Story footLogo
    Recommended For You
    Energy Stocks
    ₹1,824.250.53%
    ₹166.250.9%
    ₹516.82.34%
    ₹88.561.21%
    ₹330.651.6%
    Switch to the Mint app for fast and personalized news - Get App