Coal India’s royalties from state-owned power generation firms rose to Rs 22,000 crore in the midst of low demand and high production, sources said Monday. Mining behemoth is also not in a position to control supplies to power companies, as demand has remained subdued in the last few months, they said.
“Dues are now at Rs 22,000 crore. We are not sure when the situation will improve, and are yet to see the flow of government funds as assistance to gencos,” a company source told .
The unpaid sum was nearly Rs 12,000 crore in January.
“The bulk of payments come from state genes and the rationalization of resources to place pressure on them is therefore not feasible,” he said.
The government recently approved Rs 90,000 crore loans to state power distribution firms.
Net cash flow from Coal India’s operating activities slumped sharply to Rs 4,146 crore in the last fiscal year of Rs 16,355 crore in 2018-19.
“State generation companies are not in a position to pay. The situation is unlikely to improve until September. Dispatches are down 22 per cent year-on-year currently for the first quarter. The company is trying to maintain production at the same level as dispatches,” Brokerage house Motilal Oswal said in a note.
“The problem of cash flow is severe with some of the subsidiaries like Bharat Coking Coal, Western Coalfields and Central Coalfields. They are facing a liquidity crunch to fulfil their statutory obligations like payment of salaries in the wake of low realisations,” an official said.
Another official said that low realization is a critical issue for some subsidiaries, but the problem is short-lived. “Subsidiaries have been asked to rely on short-term loans from banks. Coal India does not have a long-term borrowing strategy through instruments such as issuing bonds to resolve this crisis,” he said.
The brokerage analyst said that the volume and e-purchase implementations are likely to remain under pressure.
Officials said the coronavirus lockdown occurred at a time when demand for power was largely halted and production at Coal India’s mines was ramping up, leading to an increase in inventory.
In April-May, the supply of Coal India to the electricity sector decreased by 24 per cent to 62 million tonnes.
