Plan Panel moots change in payment to power PSUs

The Planning Commission has proposed revamping the present payment mechanism for power PSUs. Instead of the present tripartite power payment...

The Planning Commission has proposed revamping the present payment mechanism for power PSUs. Instead of the present tripartite power payment scheme for central PSUs — like the National Thermal Power Corp Ltd (NTPC) — the proposal under consideration is to have a charge on the future revenues of the power companies.

This change in what is called the payment security mechanism is driven by the fear of increasing risk of defaults from October 2006, especially once the repayments under the one-time settlement scheme for power PSUs begins.

Confirming this, official sources however clarified that no final decision has been taken on what the new payment would be. At present, central power PSUs like NTPC have a tripartite agreement with RBI and the state governments, which in turn gives them the right to tap into the central plan assistance to states in the event of a default in payments.

Such a tripartite agreement exists for both direct payments to be made for sale of power made by the CPSUs to a state as well as for the one-time settlement scheme that was entered into with state governments in 2003, whereby as much as Rs 17,000 crore of outstanding dues were to be paid back to companies such as NTPC by floating bonds in the market.

The Centre offers special incentives to state governments, including cash incentives, for timely payments to the power PSUs. While states have lapped up the current payment mechanism, sources said such an arrangement cannot be sustained forever as the financial position of the power sector or the state governments has not improved dramatically.

Ever since the Centre came out with this policy for timely payments from state governments towards its power companies, state governments have responded positively and billing for some states has even touched 100 per cent.

NTPC officials, who are involved in the discussions for the new payment mechanism, did point out that like any other power company, their company also needs some form of assurance (in the form of credit enhancement facility) that they will get their money on time.

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They also pointed out that though the present tripartite agreement gives them comfort but have never used this arrangement to get their dues from any state government. Power dues for one state can alone run into several hundred crores of rupees. Therefore, tapping the central plan assistance to state governments is a politically-sensitive subject and all steps are taken to avoid such a situation.