Can the shutdown cripple Punjab power corporation’s finances?

New Delhi: The fall in demand for power throughout the lockdown has affected the income streams of the Punjab State Power Corporation Limited (PSPCL), however the full monetary influence of the lockdown can have a deeper influence on the monetary stability of the power company. Manish Sirhindi explains.
The demand imbalance

The demand imbalance created by the lockdown is all set to have a deep influence on the finance of the PSPCL as the company’s fastened expenditures are nonetheless seen with the Union authorities asking the state to satisfy its monetary obligations in the direction of the personal electrical energy producers.

Following the lockdown, the vitality demand in the state has gone down by virtually 40%. The two excessive income segments- trade and industrial establishments- are shut. However, there is no such thing as a shortfall in demand for power in the different two segments- agriculture and domestic- which get pleasure from subsidies on power, which means much less income and excessive working value for the company.

The cross-subsidies in the state as of now are in damaging and these are prone to enhance with the onset of the paddy season. The prevailing state of affairs has toppled the tariff-distribution steadiness of the power company and at the same time as the home customers are holding the fort, however the fee collections have been delayed by the lockdown.

The revenues

While the revenues have already been lowered by over 40%, even the remaining revenues usually are not serving to the power company to enhance its stability. The money counters are all shut down and income is being collected solely through on-line funds.

Force Majeure

The PSPCL has given the much-needed aid to the state trade by reducing down the fastened expenses, however the union authorities has not allowed the company to invoke Force Majeure and lower down its fastened expenditures. The union authorities in its April 6 letter has said plainly that the state should meet the monetary obligations in the direction of the personal power producers, which means that regardless of waiving of the fastened expenses for the trade, PSPCL will nonetheless need to pay the fastened expenses to the impartial power producers.

As the income stream are already been hit, the PSPCL will be unable to pay these expenses which can invite a 12% late fee expenses (LPS) placing the power company in a dire state of affairs the place it has no revenues to run its operations and nonetheless has to pay to the IPPs.

Financial influence to turn into clearer in the subsequent few months

The general monetary influence of the lockdown will turn into clearer in the subsequent few months. The IPPs generate payments of power and stuck expenses that are to be cleared in 60 days by the PSPCL. The payments generated by the IPPs in February, which had been at full value previous to the lockdown, have been cleared by the power company in March.

Now if the PSPCL is pressured to pay the fastened expenses to the IPPs, its influence will probably be huge on the funds of the power company which is perhaps pressured to go in for added loans to clear these payments. The curiosity generated on these further loans will ultimately be included in the annual income requirement (ARR) of the power company and will jack up the value of power.

Double hit for PSPCL

While the income streams have been hit resulting from fall in demand and delayed funds, the PSPCL has given aid to the state trade by way of fastened expenses. However, there is no such thing as a hand-holding by the personal gamers in these efforts that are utilizing their say in the union authorities to pressure the state power companies to pay fastened expenses.

The PSPCL can also be obligated to supply 10% of its power from renewable sources. In Punjab, the common value of renewable power is Rs 6.73. A unit of photo voltaic power even goes as excessive as Rs 15 a unit. During the lockdown, the thermal items have been shut down and dependence on photo voltaic power has gone as much as 20% including to the expenditures of the power company.

What the state authorities is doing

Terming the imposition of lockdown as a transparent case of Force Majeure beneath the PPAs, Punjab chief minister Captain Amarinder Singh had on Monday urged the Union Power Ministry to withdraw the obligation on PSPCL to pay capability expenses to the personal thermal vegetation.

The CM has said that the prevailing circumstances are past the management of the state Discom and has sought fast withdrawal of the April 6 instructions of the Power Ministry stating that ‘the obligation to pay for capacity charges as per PPA shall continue, as does the obligation to pay for the transmission charges’.

However, the Union authorities has not responded to the letter despatched by the CM, which means that it might pressure the PSPCL to pay the fastened expenses to the personal gamers.

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