Power Sector To Face Liquidity And Demand Crunch: CII

Power sector, one of the essential services under the lockdown till May 3, is battling the twin issues of demand and liquidity compression, CII has stated.

"Latest data from POSOCO indicates that the total demand per week between 23rd March and 12th April was 18 BU, compared to 23 BU during the week of 9-15th March (before Janata Curfew and lockdown), 25-28 percent reduction in demand.

The further extension of the lockdown could result in additional demand compression of 15-20 BU, implying a net revenue loss of Rs. 25000 to Rs. 30000 crores for the DISCOMs. This will further increase the liquidity crunch to ~Rs 45000 to 50000 crores, in addition to the Rs 90,000 Cr dues pending by the DISCOMs to generating companies' pre-lockdown," the Confederation of Indian Industries has noted.

According to it, both the transition finance as well as structural reforms are essential in tandem.

"Recent experience suggests that a financial restructuring package without insistence on structural reforms leads to temporary alleviation of the problem in the sector followed by eventual recurrence of the core problems of liquidity. We therefore propose that the post COVID-era is the right time to undertake an ambitious overhaul of the sector, as a precondition for providing transition financing", said Mr Chandrajit Banerjee, Director General, CII.

Thermal generators could face additional Rs 20,000-25,000 crore cash crunch. RE generators have been bearing the brunt of power curtailments, overdue payments by state DISCOMs of Rs 10,000 crores and policy uncertainty. Further, 20-25% of debt of RE projects comes from overseas lenders, to whom the 3-month moratorium by RBI will not apply.

Transmission companies are facing delays in on-going projects as lockdown has affected the movement of manpower and supply resulting in delays and the manufacturing sector employing 2 million people across 4000+ SMEs could be at stake.

"In such a scenario, it becomes increasingly important to inject liquidity in the sector to ensure continuous supply, power generation viability and robust industrial recovery post lockdown," CII has noted.

The Confederation of India Industry's white paper 'Sustaining India's Power and Renewable Energy Sector in the Wake of COVID19' analyses this impact of COVID- with the demand reduction coupled with delays in collections.

This CII White Paper assesses the emerging implications of COVID and lockdown on the electricity sector, and lays out a set of potential steps in the near and medium term to address the impact and solve for the longer-term viability.

GoodReturns.in