Dues of private coal-based independent power producers (IPPs, or gencos) are expected to wind down to a four-year low of less than 100 days by end of this fiscal, and well below the pre-pandemic levels, CRISIL's analysis of India's 76 GW of operational IPP capacities indicated on Tuesday.
Liquidation of receivables from state power distribution companies (discoms) following the central government's Atmanirbhar stimulus, and better payment cycles on regular billings will drive the improvement, the ratings agency said in its fresh assessment of financial position of discoms.
As per its efforts to strengthen discoms and make them cut losses and modernise operations, the Centre on Monday also came up with a new reform oriented scheme with a total allocation of Rs 3.03 lakh crore.
According to Crisil, the improved financials of discoms, in turn, would support credit profiles.
In the first half of last fiscal, discom liquidity was severely impacted by lower collections because of pandemic-induced lockdowns. Consequently, dues to IPPs ballooned more than 50 per cent by September, from the Rs 48,000 crore seen at the end of the last fiscal. This had started affecting the debt servicing ability of gencos.
The Rs 1.35 lakh crore Atmanirbhar stimulus announced in May 2020 to clear off the dues till June 2020, came in as a much needed support.
Under the stimulus, disbursements cumulating to Rs 1.05 lakh crore are expected to be provided by the end of this fiscal, of which nearly 40-45 per cent will be to clear dues of thermal IPPs. About Rs 30,000 crore has already been disbursed in previous fiscal which arrested the rise in receivables to an estimated 125 days as of March 2021 (compared with 117 days as of March 2020).
Says Manish Gupta, Senior Director, CRISIL Ratings Ltd, "The balance disbursement under the Atmanirbhar stimulus, expected in this fiscal, should help wipe-off most of the older genco bills. On the current bills too, the payment cycle has shortened by 2-3 months as the discoms own liquidity picked up in line with economic recovery. Payment security mechanisms through letters of credit is also helping in clearing IPP dues faster. Overall receivables are likely to reduce to less than 100 days, which would be the lowest in the past four fiscals."
This factor in incremental delays of 10 days by discoms, which may arise due to the second pandemic wave.
Ankit Hakhu, Director, CRISIL Ratings Ltd, said, "This improvement should free up Rs 7,000-9,000 crore in fiscal 2022, equivalent to one quarter of debt servicing for these IPPs. We expect the money to be used for paring down debt or creating liquidity buffers 3 and/or undertaking necessary capex for adherence to emission norms, lending some support to credit profiles."
That said, sustenance of payment cycles would largely be contingent on discoms being able to pay their dues regularly, which in turn, will depend on their own financial health. To ensure that, implementation of structural reforms such as timely release of subsidies and operational improvements through installation of smart meters is a requisite, the agency said.