Using TNT to blast T&D

Power Trading Corp’s T.N. Thakur’s threats have forced defaulter states to pay their dues on time

ENRON’S Dabhol power project is a mess, several global power majors have quit the country in disgust, power subsidies have crossed Rs 40,000 crore this year, and central utilities, such as NTPC and Coal India, are owed many tens of thousand crore by bankrupt state electricity boards. When was the last time you heard some good news coming out of the country’s power sector?

It’s early days yet but there is an experiment being worked on in the ministry of power, and it involves using TNT to blast out deep-seated problems like states not paying their dues on time, over Rs 20,000 crore of transmission and distribution losses every year (T&D losses are also known as theft & dacoity because that is what they really are), and so on.

TNT, and I’m not kidding, is what the fledgling Power Trading Corporation’s chairman and managing director, Tantra Narayan Thakur, is called in power circles. Possibly because of his initials and possibly due to the fact that his methods are resulting in very good results.

The country’s biggest supplier of power, NTPC, has difficulties in getting state electricity boards to pay its dues of Rs 20,000 crore, and whenever any threat is made to cut off power supplies, the power minister and even the prime minister are besieged with calls from various chief ministers and other politicians asking them to restrain NTPC. And restrain NTPC they do, after all, power is more important than mere electricity isn’t it?

Power Trading Corporation (PTC), on the other hand, is a private company (though owned by government firms such as NTPC, Power Finance Corporation and Power Finance Cor- poration) and is not only able to get its money on time, it has got state governments to give it a fixed deposit amounting to the cost of 15 days of the electricity they consume as well as a letter of credit for a similar amount. These are kept by PTC as security, which can be encashed if the states are late by even a day in paying for the power they buy. The four states already buying around 500 MW of power from PTC under this kind of stringent payment mechanism, are Delhi, Haryana, Gujarat and Karnataka. Though PTC has not cut off power supplies to any state as yet, its rules are very clear: no payment,
no power.

What the ministry of power is now planning is to augment the power sold through PTC. Electricity from the 500 MW Chukha power plant in Bhutan is to be earmarked for sale only through PTC, and another 150 MW of power from Nepal will also be sold through PTC. PTC has, in fact, been designated as the nodal agency for inter-country trading of power — so once Nepal is able to develop its hydro-potential, another few thousand MW of power would come to PTC from this source.

There is also a proposal to allocate another 1500-2000 MW of power to PTC from the unallocated power pool that is kept for emergencies — usually 15 per cent of power produced by central utilities is kept in this pool. One of the suggestions from the financial institutions like IDBI and ICICI that are currently working on restructuring the Dabhol deal, in fact, is to hand over a large part of Dabhol’s power to PTC for further sale.

So, in another four or five years, PTC would be in charge of selling anywhere between five and 10 per cent of India’s power — and that will be power for which payments will be made promptly, and since PTC’s profits depend on reducing losses, it also means that T&D losses will be checked greatly.

It is innovative solutions like this that the government needs to come up with in other areas as well. The Reserve Bank of India, for instance, has set up a committee to examine methods to deal with corporates who are wilful defaulters, and one of the suggestions that has emerged is that all banks should co-operate — there could maybe even be an RBI directive on it — and ensure that defaulters (to one bank) are not given money by any other bank. That way, once the liquidity dries up from all sources, the defaulters will be forced to come and negotiate with the original borrower. Right now, you can owe money to IDBI, and still get money from a Canara Bank or a Central Bank, or perhaps even from an IFCI.

A similar area that needs to be acted upon immediately is one that relates to the BIFR. While the BIFR is meant for companies that are genuinely sick, scores of companies that are not really sick register with the BIFR and this prevents banks from filing winding-up petitions against them for non-payment of loans — thousands of crore of banks and financial institutions are stuck in such companies that have gone to the BIFR. All that needs to be done is to amend the BIFR Act that provides such blanket protection, and companies that pretend to be sick to avoid repaying loans will have no place to hide. Law minister Arun Jaitley, it appears, is not moving on this as he believes it will be taken care of in the new company law bill.

But given the fractious nature of Parliament, there’s no telling when, if ever, that bill will get passed. Why not just make the smaller and easier changes first and later push for the larger and more difficult ones.

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