Payment security mechanism for private power firms on the cards


New Delhi: A high level panel for the power sector is considering a payment security mechanism for private power companies, which has been the main cause of stress in the sector.

The committee’s meeting was held on 31 August, where detailed deliberations were done on ensuring payment for power supplied by private sector firms, Power Finance Corporation Chairman and Managing Director Rajeev Sharma told reporter addressing a press conference. He also confirmed that the next meeting of the committee headed by the cabinet secretary is scheduled on Friday.

Elaborating further, he said that payments for supplied power to private sector generators were an issue, which was one of the main reasons for their stress since they were not paid for more than six months in some cases. Sharma said state-owned companies, such as NTPC, had an advantage since they received the payment well in time, but private sector firms had to deal with the delay in the absence of any payment security mechanism.

State-owned power generators have payment security mechanism with the Reserve Bank of India on its board. But there is no such system for private sector generators. Therefore, they often have to face delays in payments by discoms, which add to their stress and result in defaults on loan servicing.

The government decided to set up a high-level empowered committee headed by the cabinet secretary with representatives from the Ministry of Railways, Ministry of Finance, Ministry of Power, Ministry of Coal and lenders, with major exposure to the power sector, to resolve the stress and revive such assets.

Also read: Banks decide to refer all stressed power loans to insolvency courts

The committee is looking into various issues with a view to resolve them and maximise the efficiency of investment, including changes required to be made in the fuel allocation policy, regulatory framework, mechanisms to facilitate sale of power, ensure timely payments, payment security mechanism, changes required in the provisioning norms/Insolvency and Bankruptcy Code (IBC), Asset Restructuring Company (ARC) Regulations and any other measures proposed for revival of stressed assets so as to avoid such investments from becoming non-performing assets (NPAs).a

source: livemint