The implementation of the new coal allocation policy, namely SHAKTI, is expected to positively benefit the coal-based power generation capacity by about 28 GW in the private IPP segment, according to ratings agency ICRA. These were adversely affected by the lack of fuel supply agreement (FSA).
The improved availability of domestic coal since FY2015 has benefited thermal IPPs, especially those with competitively bid PPAs based on domestic coal that had been unable to pass-through the additional cost of imported coal to the state distribution utilities.
“However, lack of fresh PPAs and subdued energy demand growth are areas of concern. About 26 GW capacity in the private IPP segment (both commissioned and under-construction) does not have long-term PPAs and remains exposed to price and volume risks in the short-term trading market. Moreover, this has affected the ability of IPPs to off-take domestic coal under FSAs with Coal India, as the supply of coal is subject to availability of valid long-term PPAs or medium-term PPAs with distribution utilities,” said Girishkumar Kadam, Sector Head and Vice President, ICRA Ratings.
The progress in issuance of tariff orders for FY2018 has remained modest, with only 18 out of 29 states issuing tariff orders so far, with an average tariff hike of 4 per cent for FY2018. Further, delays continue to be observed in filing of tariff petitions and issuance of tariff orders in large states such as Rajasthan, Tamil Nadu and Uttar Pradesh.
“The progress on refinancing of the discom debt with issuance of bonds worth Rs 2.32 lakh crore by states has improved the liquidity profile of the discoms to some extent. However, the debt takeover as agreed in the UDAY MoUs has not materialised fully in some states and consequently, the reduction in book losses is likely to be lower than anticipated earlier. Based on the debt takeover progress so far for discoms in 14 states, ICRA expects the discom book losses on an all India level to decline from Rs 60,000 crore in FY2016 to Rs 35,000 crore in FY2018,” Kadam added.