The central government is persuading states to clear their arrears to renewable energy companies, which are faced with the challenge of repaying debt amid muted cash flows, power minister Piyush Goyal said
The government’s thrust on clean energy enthused private players and lured big corporate houses like the Tata and Mahindra and several independent power producers into the sector.
But state-run power distribution companies have been delaying payments, sometimes due to their own financial constraints but in some cases also because of their unwillingness to pay for renewable energy which is not as stable in supply as that from conventional sources, power producers told ET.
“One or two discoms have been delaying. We are working with them to resolve the issue. It is a state issue and we can only persuade them,” Goyal told ET.
ET spoke to green energy companies which said while the delays by state discoms have reduced, that continues to be high, making cash management difficult. Sector players list Tamil Nadu, Maharashtra, Madhya Pradesh, Andhra Pradesh and Rajasthan among the ones delaying payments.
“States like Rajasthan and Tamil Nadu are delaying payments due to their inherent financial stress. Counterparty credit risk is anyway high for renewable energy companies and cash flow problems make it worse,” said Sabyasachi Majumdar, group head for corporate sector ratings at ICRA.
In a recent interview to ET, Tata Power Renewable Energy’s chief executive, Rahul Shah, said while the government was pushing for more renewable energy, there were “subtle pulls” from state discoms discouraging these generators.
He had said given the financial constraints these discoms operate with, they were “prioritising” payments to generators who offered firm supply of electricity, which meant the thermal power generators, over the renewable energy.
Two other industry executives agreed with him, adding that wind energy makers were worst hit as some discoms contracted power at higher tariff and as electricity prices fall, they were not keen to buy power.
“Maharashtra was an outlier last year with delays of 12 months but it has improved somewhat now. In general, payments from discoms have improved since March with average overdue being around two to three months.
“Only in worst case the delays are around six months. This too may not be to discriminate against a particular class, for instance wind power, but more due to their own financial constraints,” said Sumant Sinha, chairman of ReNew Power, a solar and wind energy company.
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