Pushed into a debt trap by repeated payment defaults by the power utilities, the state-owned Haryana Power Generation Corporation Limited (HPGCL) has petitioned the power regulator to issue directions to the two distribution companies to clear all its dues.
In its application, the HPGCL has informed the Haryana Electricity Regulatory Commission (HERC) that the mounting arrears of the two power utilities, which stood at a colossal Rs 4,826 crore on May 31, 2012, have created severe liquidity crunch in the corporation, leading to default in loan repayments to financial institutions such as Power Finance Corporation and additional borrowing cost.
"As on date the corporation is not even in a position to meet its coal cost and railway freight payments. It is likely to default in payments which may derail the entire system of uninterrupted coal supply to the power plants and ultimately loss of generation to the state," according to the application filed by the generation company.
The commission has been requested to establish a "payment security mechanism" in which the two discoms Uttar Haryana Bijli Vitran Nigam (UHBVN) and Dakshin Haryana Bijli Vitran Nigam (DHBVN) would have to provide letter of credit (LC) of an amount above the average monthly billing, beside escrow arrangement, and the HPGCL is able to claim the payments by invoking it in case of delay beyond the due date. The petition is coming up before the three-member commission for a hearing on Friday.
The generation company, which supplies power worth roughly Rs 600 crore per month on an average, has not been getting regular payments except the rural electrification (RE) subsidy. In 2010-11, the HPGCL billed the two utilities for power worth Rs 5,558 crore, but received cash payment of Rs 1,406 crore and RE subsidy of Rs 2,885 crore, leaving an uncovered gap of Rs 1,267 crore.
In 2011-12 too, the corporation supplied power worth Rs 6,605 crore, but received only Rs 4,442 crore, including RE subsidy of Rs 2,736 crore. There was a shortfall of Rs 2,163 crore. "The payment record of the two discoms, particularly UHBVN, has remained dismal.
In 2011, UHBVN was supplied power worth Rs 5,994 crore, but made payment of only Rs 425 crore and another Rs 3,146 crore were adjusted against subsidy. The gap was Rs 2,423 crore," an official said with concern.
However, the two discoms have been more or less regular in making payments for purchase of power from the central public sector undertakings and independent power producers through LC and escrow facility. The payment default forced the generation company to resort to heavy short-term borrowings for working capital requirement. The two discoms, on the other hand, cite their own line losses, unviable operations and the resultant financial crunch for their inability to pay the generation entity.
The two distribution companies were created in 1999 with a clean slate after unbundling of the erstwhile Haryana State Electricity Board, but have landed in a dismal position in a decade.