Cash-strapped HPGCL defaults on loan repayment

Poor financial health of distribution firms, which owe R4,900 crore to the generation company, to blame
CHANDIGARH: Reelin gunder financial crunch caused by the non-payment of dues by the power distribution companies in the state, the Haryana Power Generation Corporation Limited (HPGCL) is in a tight spot.
The HPGCL, whose new thermal power plants have been plagued by technical faults, has started defaulting on payments. The generation company has defaulted on quarterly loan repayment of Rs 200 crore to the Power Finance Corporation due to financial tightness created by the failure of the two discoms, Uttar Haryana Bijli Vitran Nigam (UHBVN) and Dakshin Haryana Bijli Vitran Nigam (DHBVN), to pay for power purchased from them.
Lending agencies, including the PFC, have downgraded discoms’ credit rating (which means costlier loans), while the HPGCL also defaulted on coal payment in the second week of June, according to sources. “The poor payment history of the two discoms is to blame for the severe liquidity crunch in the company, but it cannot sell power to any entity other than the UHBVN and DHBVN,” an HPGCL official told Hindustan Times.
The discoms have outstanding dues worth about Rs 4,900 crore payable to the generation company. The UHBVN owes a staggering Rs 2,950 crore, while the DHBVN is marginally better at Rs 1,950 crore. The HPGCL, which has been supplying power worth roughly Rs 600 crore per month on an average to the two companies, has not been getting regular payments except the rural electrification (RE) subsidy of Rs 270 crore per month. The two distribution utilities have been irregular in making payments even after the hefty revision in power tariffs three months ago.
The payment default forced the generation company to resort to heavy short-term borrowings for working capital requirement. The UHBVN and DHBVN officials cite their line losses, unviable operations and resultant financial crunch for their inability to pay the generation entity. The two discoms, created in 1999 with a clean slate after unbundling of the erstwhile Haryana State Electricity Board, have accumulated colossal losses of more than Rs 6,000 crore with borrowings (secured and unsecured) rising to Rs 15,000 crore.
Frustrated by repeated default in payments , the HPGCL had even requested the Haryana Electricity Regulatory Commission (HERC) a few months ago for permission to sell power to other corporations outside the state in case of payment default on its bills beyond 60 days. The commission, however, turned down the request. The state government is fully aware of the financial crisis in the power sector, but it has done little to stem the rot except doling out huge subsidies for electricity supply to the agriculture sector and infusing funds in the form of equity without any notable improvement in performance. The warning signals had been there for a long time. In October 2010, the regulatory commission had, in a letter to the state government, warned it about the slipshod showing of the UHBVN and DHBVN in curbing feeder losses in rural areas and the impending financial crisis. It had attributed the “sorry state of affairs” to the lack of proper supervision on the part of senior officers of the distribution system