Friday, May 13, 2022

Power crisis: Govt directs PFC, REC to arrange loans for imported coal-based plants

The Ministry of Power has directed PFC and REC to arrange short-term loans with adequate safeguards, for imported coal-based plants

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  • These plants need working capital to buy coal and start generating power in order to restart their operations, said the Ministry of Power
  • On May 5, the govt had issued directions to all imported coal-based plants under Section 11 of the Electricity Act, 2003 to operate and generate power to their full capacity

New Delhi: The Ministry of Power has directed two PSUs — Power Finance Corporation (PFC) and REC Ltd — to take necessary action to arrange short-term loans for a period of six months with adequate safeguards, for imported coal-based plants (ICB) which are under stress or in NCLT, at the earliest. These plants need working capital to buy coal and start generating power in order to restart their operations, said the Ministry of Power in a notification released on Wednesday.

Union Minister for Power and New and Renewable Energy RK Singh held a meeting on May 9 on issues related to working capital for imported coal-based plants which are stressed or are in NCLT. In view of increased power demand and unprecedented pressure on domestic coal supplies, the Ministry of Power, on May 5 issued directions to all imported coal-based plants under Section 11 of the Electricity Act, 2003 to operate and generate power to their full capacity, even projects which are stressed or under NCLT. These directions will ensure that additional electricity is produced through imported coal and will be a net addition at a time when India’s power demand is witnessing an unprecedented surge.

“Since domestic coal supply is constrained, therefore, it is imperative that all ICB plants should run to meet the power requirements of the country,” said the Power Ministry.

Power from imported coal-based plants to be costlier for discoms

Even as the government has issued directions to imported coal-based plants to generate power to their full capacity, experts have warned that such a move will bump the cost of power procurement for discoms which are already under financial stress. In a recent report, ICRA said that the government measures to ease power supply constraints through higher coal imports are likely to increase the cost of supply for discoms by 4.5-5.0 percent in 2022-23.

“The higher share of imports for thermal generation under a pass-through arrangement as directed by MoP is further expected to lead to an increase in the cost of supply for state discoms by 4.5-5.0 percent in FY2023 at an all-India level, considering the increase in the share of imported coal and coal price level at USD 110 per MT for coal gross calorific value (GCV) of 4,200 kcal/kg,” said Girishkumar Kadam, Senior Vice President & Co-Group Head – Corporate ratings, ICRA.

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