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Interaction | April 2018

Loss-making discoms to be denied loans

<span style="font-weight: bold;">Raj Kumar Singh, Minister of State for Power and New &amp; Renewable Energy, </span>talked about issues like federal government's policy on charging infrastructure, Electricity (Amendment) Bill, among others in a briefing held post the launch of National E-Mobility Programme in association with the Energy Efficiency Services (EESL), in New Delhi. POWER TODAY presents edited excerpts of the interaction.<br /> <br /> <span style="font-weight: bold;">The Electricity Act only allows distribution companies (DISCOMS) to sell power. Are you looking at liberalising it?</span><br /> We have already liberalised the Electricity Act and it provides for franchisees. However, the charging station is not selling electricity, but giving you a service. It is actually buying the electricity from a discom. <br /> <br /> <span style="font-weight: bold;">How do you propose to set up charging stations in congested cities like Delhi and Mumbai?</span><br /> It doesn't really take up much space. By and large, I am certain that we will find space for charging stations. And, I am not ruling out the possibility of the existing filling pumps to be also utilised as charging stations. What we are saying is that we have Central Public-Sector Enterprises (CPSE). They will be encouraged to set up charging infrastructure in some cities. The discoms can bid out for smaller towns. We will encourage CPSEs to take up particular corridors such as New Delhi-Agra or New Delhi-Lucknow. But this is only the beginning. We are at a time when the number of electric vehicles is not very high. Once the number goes up, discoms will bid it out.&nbsp; <br /> <br /> <span style="font-weight: bold;">What are the likely components of the policy on charging infrastructure?</span><br /> The broad components of the policy will be who will set them up, who can set them up, who can bid for them, what the methodology for fixing tariff, etc, will be. No financial support from the government is required for setting up a charging station. The tariff we are fixing is reasonable. You only have the cost of power purchase and wheeling, which will be included in the tariff. The seller will get a margin on sales. The price of setting up a charging station is also not too high.<br /> <br /> <span style="font-weight: bold;">When do you see electricity for these charging stations coming from renewable sources?</span><br /> That's an interesting idea. However, presently I am not thinking only along those lines. I am also thinking in terms of a neutral policy whereby electricity for the charging station comes from the grid. And the grid will have a mix of both renewable and non-renewable sources of energy. <br /> <br /> <span style="font-weight: bold;">Which CPSEs are interested in setting up charging stations?</span><br /> NTPC and Power Grid Corporation of India are interested being already into allied businesses. We want as many players as possible to populate the country with charging stations.<br /> <br /> <span style="font-weight: bold;">What emerged out of your review of Rural Electrification Corporation (REC) and Power Finance Corporation (PFC)?</span><br /> We had a review of our financing arms REC and PFC. A couple of directions have been given. One, while giving loans to the power sector for generation, transmission and distribution, the prudential norms must be observed. Two, this means that when they are carrying out the appraisal for grant of loans, they must look at financials and revenue streams of the borrower. If it is found that the borrower or applicant for loan is running substantial transmission and distribution (T&amp;D) losses, then the loan won't be granted until and unless the distribution company is able to show that it has drawn up a plan to cut losses within a feasible time frame. Therefore, if you are a discom and want a loan, you must show REC or PFC your roadmap for reduction of your T&amp;D losses.<br /> <br /> <span style="font-weight: bold;">Are we talking about sanctions here?</span><br /> Yes, we are referring to sanctions. And, even when you come for disbursals etc., that will be reviewed because basically for a lender it is important that the debt is repaid. This has everything to do with financing norms. I am referring to loans taken for both capital expenditure and non-capital expenditure. <br /> <br /> Also, as far as the government schemes such as Deendayal Gram Jyoti Yojana (DGJY) and Integrated Power Development Schemes (IPDS) are concerned, we have not started enforcing this there yet. But that stipulation is there in my mind.<br /> <br /> <span style="font-weight: bold;">Were these norms suggested by power finance companies or is it something you have thought of?</span><br /> The prudential norms are well-recognised throughout the financial world. And these companies also have norms in accordance with them. So, they need to be followed. It is also important for us to help strengthen these discoms. The grants that we are giving under those schemes is to strengthen their distribution and transmission systems in the states. If we don't do that, they will become even more distressed. But, at the same time, they take loans apart from DGJY and IPDS for setting up generating stations, transmission lines, etc. It will spur discoms to become cautious and adopt programmes to reduce their T&amp;D losses by adhering to guidelines. <br /> <br /> <span style="font-weight: bold;">What was the pattern of lending before you went in for this review?</span><br /> When borrowers used to approach the power finance companies for loans, they would look at the project, examine whether it was going to strengthen the system and if it had the necessary approvals, before sanctioning the loan. However, if the T&amp;D losses are left unchecked, the repayment capacity of the distribution company gets affected. State Bank of India (SBI) has some stressed loans and they are worried about them. The bank chairman wanted a meeting.<br /> <br /> <span style="font-weight: bold;">When will the Electricity (Amendment) Bill be tabled in the parliament?</span><br /> It's ready. The draft has to be put up to me. Thereafter, I will circulate it to the states for their comments and to the Ministry of Law for its suggestions. And, if I am lucky, I will be able to introduce it in the monsoon session of the parliament.<br /> <br /> <span style="font-weight: bold;">Have you been able to figure out a solution for the stressed assets in the power sector?</span><br /> As far as the stressed assets are concerned, there is a committee for their review. The committee has members from the Ministry of Power, Ministry of Finance, etc. <br /> Many of the stressed assets were there because of lack of coal linkages or blocks, promoters not bringing in sufficient equity and power purchase agreements (PPA). And there are some stressed assets of projects that never got off the ground. Some of the stressed assets will get resolved once the Scheme for Harnessing and Allocating Koyla (coal) Transparently in India (SHAKTI) commences. Still, others have already approached the National Company Law Tribunal (NCLT). I did a review with all the financing institutions on the issue of stressed assets a few months ago. Other than REC and PFC, a large number of banks also have exposure to stressed assets. And that needs to be addressed. But as far as the stressed assets are concerned, the law and Reserve Bank of India (RBI) norms are clear. <br /> <br /> <span style="font-weight: bold;">Do you think the coal shortage might have an impact on power distribution in some areas?</span><br /> We have had a couple of meetings with the Ministry of Coal. We had asked them to increase the number of rakes that they were supplying and they did that. When we started out, the average stock used to be between three to four days. Today I have ten days' stock. Basically, they have ramped up production and despatches, but we must remember that they also have commitments to steel and other sectors. But despite that we have worked out the number of rakes that they have to give to the power sector. And I regularly monitor that. Presently, I have about 15 MT of coal in stock. I intend this stock to go up to 30 MT. So, that's why I want more rakes.<br /> <br /> Some of the stressed assets will get resolved once the Scheme for Harnessing and Allocating Koyla (coal) Transparently in India (SHAKTI) commences.<br /> <br /> <span style="font-weight: bold;">- Manish Pant</span><br />
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