Power Producer Association pleads for intervention on unpaid dues

The Association of Power Producers has called on India's Ministry of Power to intervene in the government of Madhya Pradesh's dispute with independent power producers over unpaid capacity charges due to the Covid-19 pandemic. The organization has maintained that, during the outbreak, the Madhya Pradesh Power Management Company issued force majeure notices and refused to pay the power producer's capacity charges despite their having been deemed essential services. The Ministry of Power in April noted that capacity and transmission charge payments would be required, regardless of the pandemic.

 

The Association of Power Producers (APP) in a written letter has urged Power Minister RK Singh to advise Madhya Pradesh (MP) government to again consider its decision of denying payment of rightful dues of independent power producers (IPPs).

According to the letter, quoted PTI, “on behalf of independent power producers (IPPs), we request your intervention to advise the Government of Madhya Pradesh to reconsider this decision of denying the rightful dues of capacity charges to the IPPs, which you will appreciate is highly unjust, illegal and arbitrary.”

Number of IPPs which supply power to Madhya Pradesh via Madhya Pradesh Power Management Company Ltd (MPPMCL) have been facing “arbitrary and discrimination action with regard to payment of capacity charges by MPPMCL,” the letter said.

Moreover, Jaiprakash Power Ventures, Torrent Power, Lanco Amarkantak, BLA Power, MB Power, Jhabua Power, are among those IPPs which supply power to the state, and there are at least 10,000 people employed in such IPPs in MP. In case of liquidity crunch these IPPs will not be able to pay even salaries of staff, the association claimed.

On further explaining the severe cash crunch situation of IPPs, the association further added that non-payment of capacity charges to IPPs would not only jeopardize their debt service obligations leading to the creation of a fresh set of NPAs within the banking system but may also lead to non-payment of salaries and wages and the possibility of retrenchment, as none of them has adequate reserves to tide over the coronavirus crisis.

This is in the wake of Force Majeure notices issued by MPPMCL on March 30, 2020, taking cognizance of NDMA (National Disaster Management Act) Order on March 24, 2020, the day lockdown was announced, reported PTI.

However, IPPs responded by stating that State Electricity Corporations like MPPMCL and Electricity Generating Companies came under essential services and therefor Force Majeure could not be invoked.

Despite this, MPPMCL on April 8, 2020, issued another FM notice dated March 31, 2020, in which it said either they will not schedule the power and declared capacity will not be accepted from these IPPs or they will accept declared capacity only to the extent power is scheduled from the plants, the association pointed out.

Moreover, MPPMCL further said no capacity charges would be payable by them for power not scheduled by MPPMCL irrespective of Declared Capacity of IPPs till further notice, APP said in the letter.

This notice was issued in backdate despite Ministry of Power having clarified vide circular on April 6, 2020, that “Obligation to pay for capacity charges as per the PPA (power purchase agreement) shall continue, as does the obligation to pay for transmission charges”, it said.

The RLDC / SLDC (regional and State load dispatch centres), as applicable, have accepted the declared capacity as given by these IPPs, entitling them to claim capacity charges, it added.

Despite this, MPPMCL has refused to process the bills of these IPPs and is denying them their rightful claim over the capacity charges, APP said.

Notably, the body stated that MPPMCL has decided to pay the capacity charges to the State and PSU generators, including NTPC, while denying the same to IPPs, under the cover of Force Majeure.

“As you are well aware, the country is going through difficult times due to the outbreak of COVID-19 pandemic. Further, the fragile financial health of the IPPs have forced many of them to undergo financial restructuring while others are at the verge of becoming NPAs,” the association said.

APP further added that “the same has been acknowledged by the central government, which has declared a relief package to address hardship faced by IPPs. Unfortunately, during this critical and challenging time, MPPMCL is attempting to deny legitimate & contractual payments.”

“While we have already been representing at various forums, the discrimination by the coal companies, Railways and other authorities in dealing with IPPs, this action of MPPMCL has taken brazen discrimination to another level and maybe the last straw that breaks the IPPs back,” APP said in the letter.

This is significant as PM Modi, during a detailed review meeting held on Thursday evening on the power sector with the Power Ministry and MNRE, emphasized the need for improving the financial sustainability of the power sector in order to solve the issues prevailing in the sector especially the power distribution sector.

PM also pointed out that the problems in the power sector, especially of the electricity distribution segment, vary across regions and states. He further suggested the Power Ministry that instead of looking for a one-size-fits-all solution, the Ministry should put in place state-specific solutions to incentivize each state to improve its performance.