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Thursday, 20 February 2020 05:57
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Tribunal to enforce contracts, reform-linked-financing good


Given the Andhra Pradesh government’s refusal to back down on its plan to review the renewable energy PPAs signed by the Chandrababu Naidu government—the Jagan Reddy government said they were too costly—Union power minister RK Singh has done well to come up with a new plan to tackle this. He has told Mint that a new tribunal—to be headed by a retired judge—is to be set up to deal only with enforcement of contracts. Though the Cerc and appellate tribunal Aptel can also, theoretically, do this, Singh probably feels the existing bodies are unequal to the task. Of course, the proof of the pudding lies in the eating, so a final verdict cannot be given until the body gives its first set of directions. Given all tribunal verdicts are challengeable either in an appellate body or in the Supreme Court, it is possible a state government like Andhra Pradesh will try and delay matters by appealing the tribunal’s judgment.

The tribunal, presumably, will also be used to inculcate payment discipline by the SEBs. The central government’s Praapti website records that SEBs owe power generators Rs 81,000 crore; indeed, the private sector power producers say the data is incomplete since, while Praapti shows their dues as Rs 23,000 crore, this does not include the late payment surcharge of Rs 6,000 crore or the ‘change in law’ claims of Rs 17,000 crore that the courts have ruled the SEBs need to pay.

What Singh needs to do is to extend his carrot-and-stick policy. Right now, with SEB losses far in excess of what was promised under Uday, Singh is proposing a tougher budget constraint to reduce ATC loss levels in the sector to 12%. Apart from the use of pre-paid meters to ensure better cash flows and telling states to either privatise the SEBs or use private-sector franchisees, the plan is that funding by government-owned banks and financial institutions is to be clearly linked to the states undertaking these reforms; one of the presentations prepared by the ministry of power talks of “no fund release against non-achievement of any measure for a year”. Funding by centrally-owned power financiers—like PFC and REC, for instance—should also be made conditional on states honouring contracts, and on paying their dues on time. Another option is to put in place an automatic mechanism to make the states bleed if they don’t deliver. In the early 2000s, the government forced states and SEBs to sign on to a scheme where, if the SEBs didn’t pay the dues of central PSUs, RBI deducted this money from the accounts of states—where central taxes etc were deposited—and paid this to the PSUs. The power minister needs to do the same for the private sector as well.


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