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Private power cos to get Rs 40,000 crore liquidity boost: Crisil

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MUMBAI: Private sector coal-based power generators may see an equity infusion to the tune of Rs 40,000 crore, driven by government’s initiatives and state-run Coal India’s decision to extend the tenure of credit available to them, Crisil rating agency said in a report on Tuesday.

The central government announced a Rs 1.2 lakh crore loan scheme under Atmanirbhar Bharat to enable discoms to pay for outstanding dues to power generation companies. As per the scheme, the first tranche that would account for half of the total package, would be disbursed immediately and the balance upon discoms committing to operational improvements.

“To reduce the overdues, discoms have already begun signing into this scheme under the Atmanirbhar Bharat package. As of end-November, nearly half of the first tranche has been disbursed. Given the policy thrust, we expect full disbursement by the end of this fiscal. Private coal-based power plants should see a liquidity relief of about Rs 30,000 crore given that half of the overdues are owed to them,” said Nitesh Jain, Director, CRISIL Ratings.

The scheme comes as a big relief for power generators as state discoms have been delaying payment due to their weak financial position and weak cash flows during Covid-19-led lockdowns. Overdues to private generators was a staggering Rs 59,000 crore as of October this year.

The second thing that is seen boosting liquidity is that Coal India, which caters to around 80% of the coal requirements of the sector, decided to allow letter of credit facility of 90-180 days against cash advances of the coal purchases. Lower working capital requirements and easier access to coal would ensure reduced interest burden and improved operating efficiencies. This will lend stability to the credit profiles of power gencos.

“We estimate that even with a three-month credit period, payments for coal purchases worth Rs 10,000 crore can be deferred by power gencos, helping better cash-flow management. Together, these two measures, i.e. relief to discoms under the Atmanirbhar Bharat package, and credit period by Coal India could provide a Rs 40,000 crore liquidity boost to gencos,” said Naveen Vaidyanathan, associate director, CRISIL Ratings.

Crisil said that for the purpose of this analysis, it considered 53 gigawatts of operational coal-based power plants out of the total 231 gigawatts.

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