CERC suggests bailout for ailing power firms

The order also recommended extending a moratorium on principal repayment for 2-3 years

To bail out power generators stuck with high debt and unviable projects, the Central Electricity Regulatory Commission (CERC) has made a case for a bailout package.

Delivering an order allowing compensatory rates to Tata Power's Mundra ultra-mega power project (UMPP), the regulator said, "The generator and procurers may jointly approach RBI (Reserve Bank of India), the Ministry of Finance and the Ministry of Power for possible assistance to power producers in getting relief on account of interest rates and restructuring of loan." It added if such an application was made, these entities should favourably consider the request.

In another order related to Adani Power delivered on Friday, CERC made a similar recommendation for restructuring the interest outgo.

CERC also asked Tata Power and the five procurers to jointly pursue "all possible options with the authorities concerned" for reduction in duties and taxes. "Whatever the gains made by the generator on account of any possible reduction, these shall be passed on to consumers in reducing the compensatory rates," said the order delivered on Friday, but made public on Saturday.

Besides reduction in interest rates, the order also recommended extending a moratorium on principal repayment for two-three years and an extension in the loan repayment period to reduce the hardships on capacity charges for the 4,000-Mw Mundra UMPP.

The CERC's recommendations were based on the suggestions of the Deepak Parekh committee set up last year to arrive at compensatory rates for the two imported coal-based power plants of Adani and Tata Power at Mundra, Gujarat. Earlier, the two companies had said a change in Indonesian law had led to a rise in coal procurement costs for the power plants.

Companies such as Lanco and GVK have already restructured their loans, while GMR, which has idle gas-based capacity of 1,100 Mw, has sought a special package from the government. It has also been trying to secure the direct intervention of its lenders.