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PFC will not give loans to discoms until their financial situation improves, says power secretary

Updated : November 18, 2019 01:12 PM IST

Power generation has contracted for a third consecutive month in October. Is it a demand side issue or supply side issue? Power secretary Sanjeev Nandan Sahai spoke about the issues concerning the power sector in an interview with CNBC-TV18.

Supreme Court last week gave its verdict the Essar Steel case where it upheld the supremacy of committee of creditors over other creditors when it comes to distributing claims of a bankrupt firm.

On the judgment, Sahai said: “We are examining the verdict but there is a clear roadmap for reviving these stressed power projects. Action has been taken, several orders have been issued by the Ministry of Coal and the Ministry of Power, essentially we are trying to give them coal linkage and give these stressed plants the chance to sell power in the power exchange or acquire a power purchase agreement (PPA). Once these two parts — the coal linkage and the market linkage — is settled, I think the stress will be lowered than what it is today.”

>> How Supreme Court's Essar Steel verdict could offer relief to struggling power firms

He added: “There are multiple factors which affect the power demand. We had late monsoon and once the monsoons came in and it was very good monsoon this year all over the country, the demand from agricultural sector contracted because they did not need to irrigate. The cooling demand in both domestic and commercial sector came down because of good rains. In September the contraction was only minus 0.5 percent, it is October which is being sensational at 13 percent. If I look at the overall long-term growth rates in the first four-five months it is keeping in sync with the long-term averages.

“The PPAs have happened. We have this aggregator which Power Trading Corporation (PTC) did, that was about 2,000 megawatts and we have tied another 1,000 megawatts through PFC (Power Finance Corporation). The demand is picking up and I am sure these PPAs will come through.

“Most of the power sector generators said that the current dues are being paid by the distribution companies (discoms). We have asked the discoms to abide and comply by the contracts that they have signed.

“PFC will not give loans to discoms until and unless there is a clear trajectory. PFC is an independent institution, I don’t think discoms, which have not been able to pay, are financially so sound that PFC would step in. It is for the PFC board to decide but my guess is that PFC will not probably step in.

“If we look at data, overall there is a downfall but if I look at northern region, there is a growth of 6 percent. Uttar Pradesh, the largest state, the growth is 8.4 percent, in eastern region the growth is about 3 percent, 2.6 percent to be precise. I am not going to worry too much on three months' data because I have looked at long-term average. I think the data points keep rearranging themselves so I do expect a demand pick up,” said Sahai.
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