PM gives a ray of hope to power producers

The much-awaited meeting of the power bosses with the Prime Minister happened yesterday. The meeting though did not end on a very strong note but has fulfilled the need of the hour to some extent.

We expected firm decisions considering the long list of the issues haunting the power generating companies. The real reasons behind this are the worries regarding the lower tariffs and the fuel supply. The discussions revolved around the same.

The good thing is that the coal ministry has said that the target for the coal supply to power companies can be increased from 50 per cent of Fuel Supply Agreements (FSA) to about 70 per cent in the future. We believe that when this decision gets implemented it would help increase the supply of coal to the power companies and power generation would, in turn, increase. One however needs to consider that Coal India has already cut its production in this fiscal. Also, all the mines cannot be fully operational overnight. The coal ministry has also asked the captive mines to operate to full capacity. Besides, the coal minister has also stated that the coal prices won’t increase as a result of the 25 per cent wage hike by Coal India.

It has also come to our knowledge that gas supplies to companies who do not sell power through regulated tariff would be stopped, which means that merchant power plants may feel the heat. One can see that the stocks of Lanco Infra, GVK Power and GMR Infra have further lost in value this week.   

There is not much for the hydro power companies. The issues related to distribution and transmission have also remained unaddressed. We also believe that the government’s stand will largely benefit the private companies.

Reliance Infrastructure seems to be one of the major beneficiaries. It has appreciated by 19 per cent in this week. Tata Power, which has recently commissioned the first unit of its Mundra UMPP, has also appreciated by 8 per cent. It has its Mumbai operations under regulated tariff and would thus get benefitted. Adani Power has gained by 9 per cent while CESC is up by 6 per cent and Reliance Power has been seen gaining by over 4 per cent. Power trading company PTC India has also gained by 7 per cent during the week.

The Prime Minister has set up a committee of secretaries that would further discuss the problems of the power sector. This committee will make plans for 30, 60 and 90 days. After 90 days, there will be another meeting between the PM and the power producers to evaluate the progress and chalk out a further plan of action.

                                                        Table 1 : Performance of the major power companies in this week