The focus should be on land acquisition reforms and satisfactory rehabilitation and resettlement of people in mineral-rich areas

Lanco Infratech Chairman L. Madhusudan Rao has blamed the ill-health of distribution companies (discoms), inadequate fuel supply and delay in getting environmental clearances for the crisis being faced by the power sector.

“Nearly 60 per cent of the current problems are basically on account of ill-health of the discoms. About 30 per cent could be due to inadequate fuel supply. It is a strange situation. We are experiencing extreme conditions in the sector. On the one hand, there is adequate power generating capacity. On the other, severe power shortages are being faced by industries as well as agriculture, domestic and commercial consumers,’’ Mr. Rao said.

The situation was so bad that discoms were not in a position to pay for the power they bought. Also, they had no liquidity to buy additional power to meet shortages. “It is because of this reason that most of the power companies are operating at a low plant load factor (PLF). The fuel supplies committed by various public sector entities are also not being met to more than 50 per cent power producers,’’ he added.

When there was a serious shortfall of almost 60 per cent in adding generation capacity during the IX and X Plans, it was the independent power producers (IPPs) who made the XI Plan achievable, he pointed out.

On downgrading of Lanco by rating agency Crisil, Mr. Rao said there were huge receivables pending for long from various discoms. “While power generating capacity keeps growing, if it is not supported properly by discoms, fuel supplies, and transmission companies, it will lead to serious problems and challenges.

He said time had come for the government to take bold steps to correct the situation in the power sector and support IPPs. “We are confident that the recent initiative of discoms to raise tariffs in various States and the reforms-based support by the Central Government will bring liquidity back to dicoms, and the power sector will start performing strongly in the next 12-15 months,’’ he said.

Mr. Rao felt that the focus should be on land acquisition reforms, including quicker acquisition, and satisfactory rehabilitation and resettlement of people in mineral-rich areas. Efforts should be made to look at innovative options to increase fuel supply. “Lanco has got receivables worth Rs.3,400 crore due from various discoms. We are also planning to sell out non-core assets and raise private equity holding. This would fetch us about Rs.6,000 crore by March 2013,’’ he added.

“Lanco has been in the power sector since 1997, and it has built successful projects over the past 15 years. Our power assets have been performing great for the last many years. It is the current situation that is affecting the performance of companies such as like Lanco and other IPPs,’’ he said.

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