Power Ministry gets an F for effort

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Ministry of Water and Power (MWP) has received a strong rebuke from the Ministry of Finance which has advised it to make its own efforts to pay the due Rs 18.5 billion to eight independent power producers (IPPs), that had invoked sovereign guarantees. An official source said that MWP had sought the release of the amount from the Finance Ministry, which replied that it had no surplus funds to clear at the agreed amount to IPPs and advised the ministry to take steps to clear the dues. The total liabilities of IPPs have increased over Rs 238 billion. The government had promised IPPs in May this year that at least Rs 18.5 billion would be paid immediately to clear their due loan installments. However, despite the promise no amount had been released for the IPPs, the source said. The government is unable to pay the IPPs due to the circular debt resulting from the inefficient power distribution companies which are unable to collect the dues from the consumers and in main cases the major defaulters are public sector organisations. Experts have pointed out many times to the government to form a focal point with decision making powers to resolve the issue since multiple layers of red tape was creating complexity in the resolution of the issue. Local banks have an exposure of Rs 120 billion to the local power sector. Taking serious hits, some of the banks could put the local business houses in the power sector on credit information bureau (CIB) which would mean no credit line for their other projects. As a result of strong government assurances backed by sovereign guarantee, a total of 12 IPPs were developed with a gross capacity of around 2,600 MWs with a total investment of around $2.8 billion out of which 75 percent investment, nearly $2.1 billion, came from the banking system of the country.