This report is available to users in India for ₹40,000 + applicable taxes
Table of Contents
Capacity additions and supply
Government initiated certain steps to address key issues; timely and effective implementation crucial
Government has initiated several measures to alleviate stress in the generation segment. Most recent being SHAKTI policy, which aims at removing fuel supply bottleneck by providing coal linkages to plants having Letter of Assurance (LoA). This would keep their generation cost low and ensureincreased plant availability with assured fuel supply. However, availability of fresh PPAs and discounting on existing PPA tariffs are key monitorables. The flexible coal utilization policy for state and central generation plants notified earlier in May 2016 has also resulted in bringing down fuel cost, whichis evident from reduced average generation cost of NTPC plants at Rs.1.94/kwh in FY17 as compared to Rs.2.01/kwh in FY16 owing to improved coalquality and supply.
The government is also considering to set up a holding company (termed as National Asset Management Company (NAMC)) for identified stressed assets, with the help of NTPC, PFC and REC besides banks, that will auction stressed plants or lease them on contract basis after the lenders takemanagement control. However, the lenders and promoters will have to take significant haircut through debt-equity swap. Government has also given more powers to RBI for dealing with stressed assets and schemes like SDR, S4A and flexible structuring of outstanding loans (5:25 scheme) introduced by RBI are aimed at relieving the stress to an extent.
However, timely and effective implementation of these measures are critical for an improvement in the sector.