Because the nation’s public is rejoiced in lighting candles and diyas on the night of April 5, 2020, for a 9-minute present of solidarity, it was a chance for the Ministry of Energy to reiterate, through a press launch, that the Indian electrical energy grid is powerful and steady, with satisfactory preparations and protocols in place to deal with variations of demand. Nevertheless, any such comforting solace and reassurance concerning the stability of the nation’s power-supply infrastructure, was solely a bleak mild atthe finish of a darkish tunnel which consists of slumping calls for and a country-wide cash-crunch DISCOMs at massive.
Although it might not be misplaced to say right here that Ministry of Energy did concern statements previous to the historic present of solidarity and it turned out additionally that the grids have been effectively ready to take care of any eventuality that might have arisen. Making certain uninterrupted energy provide, when nearly complete nation is beneath lockdown, it’s fairly crucial for all of the stakeholders within the electrical energy sector to work around the clock and maintain them motivated. Like another important service, electrical energy sector (together with era, distribution and transmission) has been conserving busy in the course of the 21-day lockdown, and Ministry of Energy together with Ministry of New and Renewable Power have been issuing orders and notifications sometimes with an intent to supply satisfactory reduction to the slumping energy sector.
In such course, Ministry of Energy (on March 25, 2020) and Ministry of New and Renewable Power (on March 26, 2020) declared the operation of interstate energy producing stations together with renewable energy era, as “important service”. Such declaration secures easy and uninterrupted energy circulate throughout the nation. In help of the functioning of the facility business, these Ministries prolonged all doable exemptions and help with regard to motion of related workforce, availability of related tools and different permissions for making certain that era, transmission, distribution and system operations of the facility sector is undisturbed by the lockdown. The “should run” standing of the facility producing items was and is a welcome transfer within the bigger scheme of issues, as the facility generator corporations keep away from the brunt of main outflow of fastened prices and keep some semblance of normalcy throughout the sector in these disturbed occasions.
Additional, simply few days in the past on April 9, 2020, Coal India Restricted (appearing within the curiosity of business and the spirit of varied measures undertaken by the Ministry of Energy) allowed the power of Usance Letter of Credit score for fee of coal, as an alternative of the erstwhile follow of money advance for the Gasoline Provide Agreements.The intent of such transfer is to extend liquidity available in the market and enhance the working capital cycle of the facility mills.
Sure fee associated reduction was granted by the Ministry of Energy vide its Order no. 23/22/2019-R&R Half -Four dated April 6, 2020, whereby the applicability of its earlier letter no. 23/22/2019-RR dated March 27, 2020 and Authorities’s letter to Central Electrical energy Regulatory Fee dated March 28, 2020, was clarified and it was restated that there isn’t any rest on the duty of the DISCOMs to make fee for the facility provided, because the DISCOMs are required to make the requisite fee as per the phrases of their respective PPAs. Thus, DISCOMs will nonetheless should make complete fee however with an choice to deposit or give Letter of Credit score for 50% of the price of energy whereas scheduling, whereas the remaining 50% quantity be paid subsequently throughout the interval given within the PPA.
Additional readability was issued, on this regard, stating that the comfort on the speed of late fee surcharge (with a discount on the speed from 18% to 12%) shall be relevant solely to these funds which change into overdue by the DISCOMs throughout the interval of March 24, 2020 to June 30, 2020, and never for these funds that are already overdue earlier than March 24, 2020.Due to this fact, DISCOMs aren’t given any leeway to take undue benefit of the Covid-19 scenario to cowl up for previous defaults in funds.
Apart from these, on March 28, 2020, there was a moratorium issued for three months, to DISCOMs to make funds to producing corporations and transmission licensees (clarification issued on April 1, 2020, to increase such moratorium to solely non-renewable energy producing corporations).
Nevertheless, DISCOMs that are already beneath monetary pressure and have hardly any money left to fulfil their fee obligations beneath the respective PPAs, have discovered a novel manner of wriggling out of their obligations thereunder. Newest studies point out that DISCOMs are claiming pressure majeure for his or her offtake obligation (and never the fee obligation) beneath the PPAs and are procuring electrical energy from energy trade. That is being accomplished with an intent to keep away from paying larger tariffs beneath the prevailing PPAs and procure cheaper electrical energy.
In a contrasting conflict of opinions, some imagine that DISCOMs have the simpler cut price because the deferment of fee is setback to the facility mills having a trickle-down affect on the cash-crunched sector, whereas alternatively, some imagine that Ministry of Energy has been vigilant of DISCOMs not permitting them to take any consolation of the scenario to wriggle out of fee obligations, by making certain remuneration of the facility mills. It’s simple that the choices of the Ministry of Energy have particular focus in deferment of fee obligations of the DISCOMs to ease the burden on the cash-crunched market, nevertheless, none of those fee reliefs have absolved or fully extinguished any fee burden of the DISCOMs or any energy shoppers. Nevertheless, this will nonetheless be thought-about as a particular sigh of reduction of the facility mills within the renewable and non-renewable sector, who’re assured of deferred funds in some kind as they proceed to generate and provide energy in the course of the lockdown as an “important service”.
One can witness a typical theme underlying all of the pronouncements of the Ministry of Energy, which seeks to maintain a check-and-balance mechanism in opposition to DISCOMs who’re looking for to benefit from the troubled occasions to flee their fee obligations beneath the prevailing PPAs. A cumulative and harmonious studying of varied notifications and circulars issued by the Ministry of Energy and Ministry of New and Renewable Power, largely signify a balanced method, with none direct favour indicated to both the mills, DISCOMs or the shoppers, with satisfactory foresight to the troubles of all impacted stakeholders of the system.
The intent seems to be rising the liquidity available in the market. Nevertheless, the creation of liquidity available in the market by means of deferment of funds must distinguishable from infusing of liquidity available in the market by means of reduction packages and grants. As an ad-hoc reduction to deal with the troubled occasions of Covid-19, such short-term measures of deferred funds positively have instant and short-term reduction in enhancing the working capital cycle of the sector. Nevertheless, it’s a lot awaited to see whether or not the Authorities can discover everlasting options to the recurring cash-crunch within the business, by means of such short-term declarations.
With a downfall of business demand and consumption of energy, with recurring requests for waiver of electrical energy fees from MSMEs throughout the nation and conserving in thoughts the historical past of the sector which has not been promising with respect to liquidity, the sector is in anticipation of extra intervention by the Authorities, to deal with the big losses that may very well be suffered by all stakeholders in mild of the continuing Covid-19 lockdown.
[This article was co-authored by Puspak Chamariya, Associate at L&L Partners]
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