The power ministry has updated the definition of “statutory payments” in its latest order on the debt servicing mechanism for stressed power generation assets, effectively leaving more money for debt-servicing with the firms concerned and reducing their tax burden.
The latest clarification modifies a recent order on the creation of ‘Trust Retention Account’ (TRA) by stressed power plants which are receiving coal through the Shakti scheme. The power ministry has now clarified that that revenue deposited in the TRA would be used to clear taxes and duties only for additional electricity that plants are producing from the extra coal they receive through the Shakti scheme. So, tax obligations from power produced from other sources of coal won’t now burden stressed units.
According to a recent ministry note, reviewed by FE, “statutory payments” is now defined as “all payments towards statutory dues arising from incremental generation from this (Shakti) scheme”. Power ministry’s August 5 order on TRA described the term as “all payments towards statutory dues”.
The power ministry, in consultation with the Department of Financial Service, has introduced the TRA mechanism for stressed power plants to utilise their surplus revenue for servicing debt. According to the mechanism, all revenue of power plants using Shakti-coal would be deposited in a TRA —monitored by the lead lender to the assets — which would be used to first pay statutory payment, followed by fuel cost, transmission expenses, operation and maintenance expenses and then pay interest on loan and principal to lenders. Electricity generated from coal procured through the Shakti scheme can only be sold through spot power exchanges or for short-term electricity supply.
The TRA mechanism was introduced after the Cabinet Committee on Economic Affairs on March 7 approved certain recommendations of a group of ministers and a high-level empowered committee on stressed power assets. Following the Cabinet decision, the coal ministry had amended the eligibility norms for the Shakti scheme, allowing power plants without power purchase agreements (PPAs) to apply for coal linkages, provided electricity generated from this coal is sold through short-term contracts. The original version of the scheme allowed coal supply only to power generation capacities with long-term and mid-term PPAs.
Ten power plants had won 25-year coal linkages of 27.2 MTPA in the first round of Shakti auctions where bidders quoting the highest discount to its existing tariffs were allowed to choose their preferred source of coal supply from eight available sources.
The operating performance of stressed power assets which had won linkages in the first round — Adani Tiroda, GMR Kamalanga, GVK Goindwal Sahib and KSK Mahanadi — has improved after they secured coal supply assurance. Power plants had offered discounts of 1-4 paisa per unit on existing tariffs in that auction.
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Source: Financial Express