Torrent, Lanco among private gencos not paid by Madhya Pradesh Power Co

This move by MP govt comes after the union power ministry had clarified electricity generation is an essential service and no state can invoke force majeure to defer payments

Several private independent power producers (IPPs) including Torrent Power, Jaiprakash Power, Jhabua Power, Lanco Amarkantak have complained to the union power ministry that Madhya Pradesh Power Management Company Limited (MPPCL) is not paying them.

The IPPs also alleged MPPMCL has refused to schedule power from these units and that they are not being paid capacity charges. A power procurer is obliged to pay capacity charges to a generator for the power scheduled to be supplied, irrespective of the quantum of consumption.

This move on the part of the MP government comes after the union power ministry had clarified that electricity generation is an essential service and no state can invoke force majeure to defer payments. "Obligation to pay for capacity charges as per the power purchase agreement shall continue, as does the obligation to pay for transmission charges," power ministry had said in April, after several states stopped scheduling power from several stations and denied payment. Due lockdown since March 24, electricity demand has fallen by record levels.

In view of low bill collections, the union power ministry allowed states to defer interest payment on their dues to the gencos. But no state has been absolved from non-payment.

The MP state government on the other hand invoked force majeure clause against the private gencos to support their non-payment. The force majeure clause in an agreement pertains to events and circumstances that are beyond the control of humans. The clause, however, does not excuse a party’s non-performance entirely, and only suspends it for the duration of such events.

"MPPMCL on 8th April 2020 issued Force Majeure notice which was dated 31st March 2020 in which they stated that either they will not schedule the power and declared capacity will not be accepted from these IPPs or they will accept declared capacity only to the extent power is scheduled from the plants," said a letter by Association of Power Producers (APP), representative body of private gencos.

APP further said MPPMCL also said "no capacity charges would be payable by them for power not scheduled by MPPCL irrespective of Declared Capacity of IPPs till further notice."

IPPs have now asked the union power ministry to intervene. They said the non-payment MPPMCL will worsen the debt situation of several power companies.

"Non-payment of capacity charges to the IPPs would not only jeopardise their debt service obligations, leading to creation of a fresh set of NPAs within the banking system, but may also lead to non-payment of salaries and wages and retrenchment, as none of them have adequate reserves to tide over the current situation. In all there would be at least 10,000 people employed by the IPPs, impacted by this stand of MPPMCL," said the letter by APP.

IPPs have alleged that the state government continues to pay capacity charge to central and state power generating stations. APP said MPPMCL has also refused to process the bills of these IPPs.