APP writes to power min, seeks coal payment deferment amid lockdown
"Looking at the steep fall in cash flows for the generating companies (gencos) due to non-payment by discoms, we humbly submit that in order to avoid any disruption in power supplies, the need of the hour is for CIL (Coal India) to extend supplier's credit to the power sector consumers... such a measure will help the industry immeasurably without impacting the financials of CIL," APP said in a letter to Singh earlier this week.
According to the Payment Ratification And Analysis in Power procurement for bringing Transparency in Invoicing of generators (PRAA) portal, total oustanding dues of discoms towards power gencos is around Rs 92,602 crore as of February 2020.
The letter said deferral of coal payment will help avoid disruption of power supplies.
APP has also written a similar letter to Coal Minister Pralhad Joshi explaining the the requirement for this supplier's credit.
According to the letter, CIL has recently implemented payment for coal through Usance LC (letter of credit), but this is essentially banker's credit, which depends upon credit worthiness of the generating company and cannot be a substitute for supplier'scredit. '
APP pointed out that to operationalising Usance LC during this period of stress involves feasibility concerns and procedural complexities - credit worthiness of already stressed generating companies, exhaustion of bank lending limits and recent statement by SBI Chairman wherein he has suggested that banks would seek government guarantees against further loans to certain sectors.
Therefore, the body said that the benefits of Usance LC may not be availablefor many developers during this crisis period.
In its letter to Joshi, APP said, "During such times when the generators are totally starved of cash and have also exhausted all their credit limits with the banks just to ensure enough working capital for sustaining day to day operations, Usance LC mechanism cannot be a substitute for extending supplier's credit to the coal consumers, especially as many developers will not be able to take benefit of this due to exhaustion of bank lending limits."
The power sector is bound to be one of the sectors where banks would be unwilling to lend additional credit, keeping in mind the high incidence of delinquent loans and stressed balance sheets in the sector, the body told Joshi in its letter.
It urged Joshi to advise the CIL to extend supplier's credit against coal purchases as this measure would immeasurably help smoothen the turbulence and ensure that the power supply does not face any disruption caused by the present crisis. KKS MKJ