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Business News/ News / India/  Generators want ministry to intervene as power purchasers invoke force majeure
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Generators want ministry to intervene as power purchasers invoke force majeure

Citing covid-19 as a reason, power distributors want to delay payments by 3 months
  • Generators feel force majeure doesn't absolve distributors of all their obligations
  • Among the distribution companies which have invoked force majeure are those in Uttar Pradesh, Punjab, Dadra & Nagar Haveli, Telangana and Delhi, Photo: BloombergPremium
    Among the distribution companies which have invoked force majeure are those in Uttar Pradesh, Punjab, Dadra & Nagar Haveli, Telangana and Delhi, Photo: Bloomberg

    NEW DELHI: Generation companies have knocked on the doors of the power ministry for immediate intervention as distributors invoke covid-19 as a force majeure event and renege on their purchase agreements (PPA) with distribution companies.

    Among the distributors which have invoked the clause are Uttar Pradesh Power Corp Ltd (UPPCL), DNH Power Distribution Corp Ltd of Dadra and Nagar Haveli, Punjab State Power Corp Ltd and Southern Power Distribution Company of Telangana.

    Power generators fear the action by a few states and their distributors could send a wrong signal to others to follow suit. As feared, BSES Rajdhani Power did the same with its 1 April letter to THDC India Ltd. The Association of Power Producers of India (APPAI) has sent a letter to ministry of power, seeking urgent relief in the matter that threatens to dry up the cashflow of generation companies.

    According to the 31 March letter, APPAI director general Ashok Khurana has requested power minister Raj Kumar Singh and power secretary Sanjiv Nandan Sahai to tell the state governments that there is no moratorium on payments to generation companies. As per the letter, force majeure doesn’t give the generators a blanket escape from their obligations.

    The power sector has never been short of woes -- poor offtake of energy due to reduced demand being the latest one. The current crisis has its genesis in the covid-19 pandemic that forced the Modi government to declare a 21-day national lockdown till 14 April. The lockdown has brought the economy to a standstill as factories producing steel, cement, automobiles etc remain shut.

    With jobs under threat and little manufacturing happening, the government and the regulators have declared a three-month moratorium on taxes and dues payments by individuals and companies.

    As part of its efforts to alleviate the pain of the power sector, the government, on 28 March, urged the sector regulator to provide relief to distribution and transmission companies by reducing surcharge to 1% from 1.5% on payments delayed beyond 45 days by distribution companies.

    “It appears that states seem to have jumped the gun, and have taken the reference to ‘moratorium of three months’, as mentioned in the Press Release dated 28.03.2020 seriously, without this actually being mentioned in the directions issued to CERC and without the CERC/SERC instructions having been released," APPAI said in its letter. The CERC did accede to the ministry’s request on Friday.

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    Published: 04 Apr 2020, 07:26 PM IST
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