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energy | IST

Some states have misrepresented force majeure clause, says Tata Power’s Praveer Sinha

Fortunately Reserve Bank of India (RBI) has come up with the directions whereby the loan repayment and the interest repayment has been deferred by three months and that – to a large extent – will support the generating companies, said Praveer Sinha, MD and CEO, Tata Power.

Some states are invoking force majeure due to a dip in demand for electricity, and power producers are worried about payments from the distribution companies (DISCOMS) even as they continue supply to ensure 24/7 electricity pan India.
To discuss these issues in detail CNBC-TV18 spoke with Praveer Sinha, MD and CEO, Tata Power and Ashok Khurana, director general, Association of Power Producers (APP).
We understand the issues that are basically impacting the power sector right now, in spite of all the challenges they continue to supply power and the credit for this goes to all the power companies who continue to work even during very challenging conditions, said Sinha.
"However,  the whole thing has been misrepresented by some of the states. When one looks at force majeure, the definition is very clearly defined in the power purchase agreement (PPA) and it cannot be outside the four walls of the PPA wherein certain conditions have been said to be construed as force majeure," said Sinha.
"If the PPA does not provide in a pandemic like this as force majeure then the reason that they have not been able to collect money or things like that - they are trying to put the main issue under the carpet and trying to take shelter under the present conditions for not to make the payments,” said Sinha.
According to Sinha, many of the states which have gone ahead and have done the invoking of force majeure are actually the states, which otherwise were also not paying. They are trying to oversimplify the whole thing and taking shelter under this present condition.
Khurana said, “I have been talking to all the generators and many of the distribution companies. We need to work in cooperative  and a collaborative approach to see that the lights are kept on. We must realize that consumer payments for power bill will suffer because of the economic impact and the demand has fallen. Both things will have bearing on distribution cashflow, which will anyway impair the cashflow of generators that are already under very heavy stress." We have to share the pain. We must realize that we are passing through a crisis and we don’t know its duration, he added.
When asked what would his ask be for the payment from the government, Sinha said, "We have been fortunate that we do not have too much of outstanding from DISCOMs and all our PPAs have LC provisions. We have been getting regular payments, there have been on defaults as such from the various DISCOMs. Going forward, next two-three months will be very challenging."
"Fortunately Reserve Bank of India (RBI) has come up with the directions whereby the loan repayment and the interest repayment has been deferred by three months and that – to a large extent – will support the generating companies,” added Sinha.
“Both in Delhi and Mumbai, our collections have gone down but it has not gone down to levels where we are unable to sustain our operations and make payments to the generating companies - our collections have gone down by about 10-15 percent but not to an extent where there is no collection at all," said Sinha adding that the DISCOMs cannot take shelter under the pretext that there is COVID-19 and hence the collections are not at all happening.
"Collections are happening, we ourselves are working, our teams are working in connecting with all our consumers and they are making payments. In some cases, they have asked for staggered payments or payment in installments but it is absolutely zero collection. DISCOMs need to also support the generating companies,” Sinha further said.