New liquidity infusion scheme: Private power producers say ‘no’ to UP’s demand for discounts

Uttar Pradesh has received Rs 21,000 crore under the Centre’s Rs 90,000-crore liquidity infusion scheme to clear the outstanding dues owed to IPPs as on March 31.

Independent power producers (IPPs) such as Tata Power, Bajaj Energy, KSK and Hindustan Power have rejected a proposal by the Uttar Pradesh government making the settlement of state discoms’ dues to them under the new liquidity infusion scheme, contingent on the producers offering tariff rebates for past supplies.

Uttar Pradesh has received Rs 21,000 crore under the Centre’s Rs 90,000-crore liquidity infusion scheme to clear the outstanding dues owed to IPPs as on March 31. According to the design of the scheme, the funds from PFC-REC are scheduled to be disbursed to the state in two equal tranches and similarly, the dues to IPPs are to be cleared in two equal instalments.

While Uttar Pradesh has used the fund to clear 50% dues to CPSU generators (including NTPC), Power Grid and renewable energy plants, it has only paid 12.5% of the outstanding to IPPs so far. Private thermal power plants which have considerable amounts to be received from the state discoms include Tata Power’s Bara unit (Rs 1,249 crore), Bajaj Lalitpur (Rs 3,370 crore), KSK Mahanadi (Rs 1,676 crore) and Hindustan Power’s Anuppur (Rs 1,306 crore).

In spite of the Union power ministry circular clarifying on July 30 that “the payments (to gencos) against the sanctioned loan amounts may be made to them in proportion of their dues,” in a letter to the ministry dated August 3, Uttar Pradesh power department said that “we are in the process of developing an online and transparent bidding process which could enable them (IPPs) to get up to 75% of their dues in the first tranche of the loan depending on the rate of rebate they offer”.

The state has argued that since CPSU power utilities have offered discounts to discoms in the light of the crisis induced by the coronavirus outbreak, IPPs ought to do the same. The Union power ministry had advised CPSU utilities to offer a one-time rebate of 20-25% on fixed charges to the state-owned discoms. Accordingly, NTPC has offered a discount of Rs 1,363 crore to the discoms across the country.

“All generation companies declined to offer discount to UP,” a senior official from a power company told FE on condition of anonymity. The state had sought discounts specifically on fixed charges, which usually comprises returns on equity, interests on long-term and working capital loans, depreciation and operations and maintenance charges. “All banks have unanimously told IPP gencos not to give discount to UP discoms,” the person added.

Irregular payment by discoms was one of the main reasons behind power sector assets worth Rs 1.75 lakh crore in the country being identified as stressed by lenders. Such moves also raises questions about the sanctity of power purchase agreements and if this is allowed, other states will soon follow suit, an industry expert said, commenting on Uttar Pradesh’s action. “Developers expect fair play from sovereign customers,” the person added.