‘India’s non-performing thermal assets are stressed, stranded’

A review of 12 non-performing or “stranded” assets in India’s thermal coal-fired generation sector has found that several more thermal power stations in the country could potentially be classified as stranded assets than what was estimated.

A new report released by the Institute for Energy Economics and Financial Analysis (IEEFA), ‘Seriously stressed and stranded: The burden of non-performing assets in India’s thermal power sector’ also names Gulbarga Thermal Power Station.

The 12 non-performing or stranded assets reviewed included some previously identified by the government, others which have been “unable to operate at a competitive price,” and projects which have been on the drawing board for over a decade and “most likely will never be constructed.”

Tim Buckley, lead author of the report and director of energy finance studies with IEEFA, says stranded assets in the Indian thermal sector are not limited to the 34 projects highlighted by the Standing Committee on NPAs in 2018.

“Each of the 12 non-performing assets we reviewed had questionable economics behind their investment proposals, particularly as lower cost renewable alternatives can be built in a third of the time and at 30% or lower cost to Indian electricity consumers,” the report said, adding that apart from placing stress on a “troubled banking sector,” they are also “hampering the bank’s ability to invest in clean new renewable energy projects to meet both India’s electricity demand needs and the country’s ambitious world-leading renewable energy targets.” About the 1,320MW Gulbarga Thermal Power Station, the report said the plant, proposed by the State-owned Power Company of Karnataka Limited (PCKL) in 2010, is planned to have two units of 660MW “based on outdated technology.” Land totalling 1,600 acres was acquired in 2010, but since then the project has not acquired a coal linkage nor an environmental clearance, it pointed out.

Coal dependency

The report also mentions the State’s coal dependency. “Karnataka does not have any in-State coal production. It is dependent on coal with a high delivery cost, procured either via railways from mines outside the State or via imported seaborne coal. As of September 2019, Karnataka had 9.8GW of operational coal-fired capacity. The coal-fired power fleet in Karnataka has operated at an unsustainably low utilisation factor of 35% for two consecutive years 2017-18 and 2018-19.”

The report came at the same time that ratings agency ICRA revised the year end outlook for the power sector from “stable” to “negative”, driven by factors such as the “slowdown in energy demand growth, sluggish progress in resolution of stressed thermal assets and less than expected improvement in discom finances.”

The IEEFA report has recommended that instead of building “uncompetitive and expensive coal-based thermal power plants,” investments should be made in wind and solar-based power systems as well as flexible gas-based plants.

Energy expert M.G. Prabhakar concurred.

“Capital is scarce. Why use it for technologies that are outdated? We already have an installed capacity of 28,716 MW against the 12,881 MW peak load met IN 2019-20. We are selling energy at throwaway prices in the open market for ₹4.20 (average for 2018-19 and up to June 2019-20) and charging industrial consumers ₹7.20. It is illogical,” he said.

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Printable version | May 13, 2021 9:50:37 AM | https://www.thehindu.com/news/national/karnataka/indias-non-performing-thermal-assets-are-stressed-stranded/article30397577.ece

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