Stress faced by coal-based power projects in India has eased significantly with an increase in electricity demand, improved coal availability and government initiatives, experts said. However, delayed payments by distribution companies continue to pose challenges to power producers.
The minister for power and renewable energy, the industry hopes faster implementation of many pending proposals from the last government, including a payment security mechanism for private power producers as recommended by a cabinet secretary-led committee. Of the 40 GW capacity from 34 coal-based power that had been identified under the ‘stressed assets’ category by the government, about 16 GW are yet to be resolved while the remaining projects are able to fully or partly meet their debt obligations.
The demand for electricity was constantly increasing with many states asking for allocation of power surrendered by other states. The state-run power producer has received requests from Telangana, West Bengal, Bihar and Uttar Pradesh seeking about 1400 MW of electricity surrendered by other states.
Of the 40 GW identified stressed assets, 24 GW are commissioned capacity while 16 GW are underconstruction projects. As much as 22 GW did not have PPAs and 11GW did not have coal. The government’s coal supply auction scheme, Shakti in May 2017, had helped ease the stress in five plants of 8,490 MW. Then in April last year, PPAs for 1900 MW were won by power plants in the pilot round of auction. Results of the second round of PPA auction concluded in April this year are yet to be finalised.
Other measures to reduce logistics costs and clarity on passthrough of government duties and levies in tariffs have also helped a few projects. Power regulator Central Electricity Regulatory Commission’s recent order to allow passthrough of the costs of imported coal in case of supply shortages from Coal India is also likely to help ease the stress in the sector.
Low spot power prices despite good demand due to warm weather and elections indicate better coal availability. Last year, power prices in September and October had peaked to Rs 18 per unit as coal stocks plummeted at power stations. Currently, prices at power exchange are averaging at Rs 2.7 per unit with a minimum price at Rs 1.10.
While taking charge of the power and renewable energy ministries on Friday, RK Singh said the government’s next agenda would be 24×7 power supply. Priority would also be given to bring change in the sector with respect to international commitments and environment.
The previous NDA government had started deliberating on a mechanism for fast recovery of outstanding dues from discoms. Revival of 24,000 MW of gas-based stressed power plants idling or underutilised due to lack of gas and auction of aggregated power pacts with coal supply are expected to be on priority basis for NDA II as well.