Solar Association Asks ₹50 Billion Fund Allocation for Cash-Strapped Andhra DISCOMs

The National Solar Energy Federation of India (NSEFI) has requested the Union Power Minister R.K. Singh to set aside ₹50 billion (~$666.2 million) from the distribution companies (DISCOMs) liquidity package for Andhra Pradesh DISCOMs so their dues can be paid to renewable generators.

The NSEFI letter said that such an action on the part of the central government would go a long way in ensuring the financial sustainability of the renewable generators that have signed power purchase agreements (PPAs) with Andhra Pradesh government.

In May 2020, the central government announced that power distribution companies would receive ₹900 billion (~$12.03 billion) as part of the Government of India’s stimulus package to help the Indian economy recover from the coronavirus crisis. These funds were intended to help DISCOMs out of this unprecedented situation as their revenues have dropped drastically, Sitaraman noted, adding that loans would be given against state guarantees solely for clearing liabilities to power generating companies.

According to NSEFI, the members of the federation, which include developers, EPC (engineering, procurement, construction) contractors, rooftop installers, and system integrators, expect relief and are looking forward to disbursements from the Power Finance Corporation (PFC) and REC Limited.

The letter added that The federation underlined in the letter that nearly 800 MW of renewable energy projects in the state of Andhra Pradesh is fighting a battle in the state High Court for ensuring the sanctity of contracts. Even the center is also a party to the case and is supporting the developers and generators.

Further, NSEFI alleged that even before the court case, the state DISCOMs had not been paying the renewable power generators regularly, and even if they were paying, it was being done at an interim rate. Many of the members of the federation received payments at an interim rate with significant deductions made by the state DISCOMs, the letter claimed.

According to NSEFI, the outcome of the legal battle should maintain the sanctity of the contracts and should make it mandatory for the DISCOMs to make the payment of full tariff. But this might take some time, and by then, the Government of India’s liquidity program might be over.

“It is noteworthy that the payment of remaining tariffs to renewable generators, Andhra DISCOMs would require somewhere between ₹40 billion (~$533.01 million) to ₹50 billion (~$666.2 million). For AP DISCOMs, making such amount of payment on an immediate basis may not be possible, and any further delay in payment from the DISCOMs despite a court order, would worsen the financial woes of renewable energy generators,” the letter added.

Mercom has previously written about how distribution companies have been a significant strain on the Indian power system. Their poor financial performance has been weighing down the entire sector with their inability to pay power generators on time, manage their losses, and iron out other inefficiencies.

Previously, the Andhra Pradesh Southern Power Distribution Company Limited (APSPDCL) sought refuge under the force majeure clause following the COVID-19 pandemic and the subsequent nationwide lockdown. In a letter, it was claimed that the state’s DISCOMs are suffering from drastic reductions in revenue because of the three-week lockdown and the consequent disruption in economic activity. It said that this had affected a significant portion of consumers’ ability to pay their electricity bills.

As of March 2020, DISCOMs owed renewable energy generators ₹68.37 billion (~$914.5 million) in outstanding payments spread across 307 pending invoices, according to data from the Ministry of Power’s (MoP) payment ratification and analysis portal (PRAAPTI). Haryana, Rajasthan, Delhi, Uttarakhand, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, West Bengal, Odisha, Arunachal Pradesh, Nagaland, Manipur, Meghalaya, Telangana, Andhra Pradesh, Goa, Karnataka, Kerala, Tamil Nadu, and Puducherry were rated “Worst” in terms of ease of payments to DISCOMs, according to the portal.

As of March 2020, power dues payable by Andhra Pradesh DISCOMs amounted to ₹66.73 billion (~$883.13 million). The Andhra Pradesh Southern Power Distribution Company Limited had power dues of ₹45.38 billion (~$600.57 million), while the Andhra Pradesh Eastern Power Distribution Company Limited had dues of ₹21.35 billion (~$282.55 million).

Recently, the Government of Andhra Pradesh provided a state-backed guarantee for DISCOMs to avail ₹66 billion (~$873.4 million) loan from PFC and REC Limited. The funds were announced solely for clearing liabilities to power generating companies and are to be issued only against state guarantees.