Karma Energy Ltd Management Discussions.


The Pandemic COVID-19 has been the headlines across the globe since first quarter of 2020 adversely affecting every person / entity whether Individuals, Manufacturing or Service Sectors, Commercial establishments, Governments and Nations itself to a varied degree. The global economy has been battered and India is not an exception. India beginning with National Lockdown in March 2020 and step by step relaxation appeared to have controlled the Covid spread by early 2021, when it was embattled by the new waves of infections and mutant variations leading to a chaotic atmosphere with shortage of all essential armors whether hospital beds, medical oxygen, anti-Covid drugs, availability of vaccines to name a few. This led to huge increase in Covid affected persons and the manifold increase in the unfortunate deaths of near and dear ones of many. The corrective steps were re-imposing State wise lock downs of short durations and its extensions. Apparently as per World Health Organization apart from following the strict precautions of wearing masks, social distancing, sanitizing regularly there is no short cut for defense against the pandemic except Vaccination of every person. In this regard India has a long way to go considering its large population. The Global economy shrunk. However smaller and richer countries with less population have almost bounced back in their activities.

As far as India is concerned, the Central Government and RBI took a number of remedial steps leading to contraction in economy being restricted and as per RBI survey indicators reflect the GDP growth in 2020-21 being around negative 8% with a prospect of GDP growth in 2021-22 to touch double digits. However considering the need to vaccinate substantial strata of the population and the new wave forcing state governments on the back foot, relaxations are expected to be measured and progressive only with the hope that no further waves may creep in putting a spoke in the revival process of economy.

Company Business

The renewable power generation, which is the business of the Company, was one sector which had less impact of the Pandemic. However the double blow of continuous adverse impact of regular regulatory changes especially in Maharashtra and Nature itself playing truant with inadequate wind availability when monsoon was reasonable in 2020-21 took a heavy toll of financials of the Company.

The performance of the Company is directly linked to the Renewable Energy Policies of both Centre and State Governments, effectiveness of Nodal Agencies and laying down of encouraging policies and implementation thereof by State Electricity Regulatory Commissions.

In Andhra Pradesh, though company has been generating power from its 7.5 MW, it continues to battle in judicial forums for realization of the 50% of the generation dues with about Rs.3.80 Crore for the period January 2011 to May 2014 pending to be received due to the imbroglio created by the State bifurcation and judicial authorities including the jurisdictional High court not imparting a fair justice and consequently the matter is still lingering in the legal circles and the legal system itself is in doldrums consequent to the lack of regular functioning of the courts and tribunals in this pandemic period.

The PPAs for 6 MW and 1.5 MW were renewed in FY 2020-21 after a protracted 35 years of discussions and litigations, albeit at a low tariff of Rs.2.23 and Rs.1.50 per unit respectively as against hitherto realization of Rs.3.37 per unit for about 20 years of operation of the plants. Post PPA execution the State utility cleared the outstanding dues from 2015-16 to January 2020.

In Tamil Nadu, for no valid reasons payments have been delayed for more than 24 months. However by offering certain discount the Company realized major dues of one site till December 2019 and further with the Central Government aiding hugely the State Electricity units with soft loans the State utility released 50% of the dues since mid-2017 till mid-2020 with balance 50% is still pending.

In Maharashtra, the major power are being sold to third party however the realization therefrom has been dwindling on account of high open access costs introduced at different stages but with regular intervals. Such charges include additional surcharge, increased cross subsidy surcharge, restriction of banking to one month and introduction of forecasting and scheduling for every 15 minutes time block and deviation, if any resulting in levy of penalty charges. Thus as compared to 3-4 years back the net unit realization has dwindled to less than preferential tariff for Group II projects being offered by the State utilities in the State. The increase in the charges is under litigation before CERC since 2017 and in the past 3-4 years the SERC has already revised the charges few times. Further was the blow of REC pricing regulations unleashed by CERC effective from July, 2020. The new regulation has reduced the forbearance price from Rs.3000/- to Rs.1000/- per REC and Floor price to Rs."0" from Rs.1000/- per REC. REC being the "Green" Component in Open Access, lack of it is virtual death knell to Open Access as developers are deprived of the vital encouragement to sustain the operations of renewable energy. As a result the matter is under litigation before the Tribunal and little trading taking place since June 2020. Since the legal systems in the Country are very slow which is further compounded by the pandemic, no one knows when the justice would prevail. For certain wind mills where power is sold to State Utility, there has been delay in realization of about 1-1.5 years.


All machineries of the governments, all industries, all business and non-business entities and public at large continues to grapple with the pandemic COVID-19 Since first quarter of 2020 and as per the experts this is going to last for over 2 years and may become a new way of life ie the virus and business activity may have to live together as it a toss between the contrary effects of hunger due to business closures and affected by pandemic by venturing out.

As far as Companys operations are concerned like any other renewable energy entity many adverse regulatory changes have been worse than the pandemic. Some sites are recording negative earnings. The Company has taken lot of steps for cost reduction, tight cash flow management, policy changes to mitigate the downturn.

As it stands today, the steep increases and new type of levies through regulations, restrictions on banking especially in Maharashtra, belated payment of dues by utilities do not augur well for decent future for the Industry and Company. All talks of quantum increase in installation of RE Power in Giga watt scale will remain a pipe dream.


On the Renewable Energy Sector, the considerable delay in processing or decision making by state utilities and State Electricity Regulatory Commission and also the higher judicial authorities have been resulting in considerable strain on the liquidity front and also planning on the future projects.

The company continues to suffer due to multiple issues viz. state bifurcation, lack of funds, , delays in releasing the outstanding dues by state utility in Tamil Nadu and so also in Maharashtra coupled with ever increasing open access charges, restriction on banking to mere one month from 12 months that as existed for more than two decades in Maharashtra , introduction of forecasting and scheduling across many states leading to payment of penalties for deviations are major concerns.

The experience of the Company has been that inordinate delays in adjudication of the matters by Electricity Regulatory Commission, Appellate Tribunal for Electricity and higher courts result in acute pressure on the Company due to huge mismatch in inflow and outflow of funds. In the wind power business the expenses are more or less fixed and also the loan repayment and interest to lenders like banks, however, the delayed receipt of generation proceeds necessitate that company has to resort to temporary borrowings to tide over the mismatch. This is also a concern as it has to bear the brunt of finance cost.

The Management Discussions and Analysis explaining the objectives of the company, the opportunities and threats, the outlook for the future, the risks and concerns have to be read with the meaning of relevant applicable laws and regulations. The actual physical performance may differ materially from those explained hereinabove.


The company has a system of internal controls to ensure that all its assets are properly safeguarded and protected against loss from unauthorized use or disposal. Further all the internal control system is practiced by the company to ensure that all transactions are authorized, recorded and reported correctly.

The Company has an Audit Committee of Directors which reviews the adequacy of internal controls.


The business in which the company is engaged does not call for large manpower resources.

The company has a team of able and experienced professionals. The work culture and value system in the company is designed to provide each employee the adequate space, freedom and guidance to bring out their full potential and provide personal growth opportunities within the organization. The human resource assets have been ably supporting the company despite the issues which the company is facing in its chosen field.


Sr. Parameters No. F.Y. 2020-21 F.Y. 2019-20
1 Debtors Turnover 50.02% 35.92%
2 Inventory Turnover 1.94% 1.27%
3 Interest Coverage Ratio (1.18) 1.04
4 Current Ratio 0.38 0.60
5 Debt Equity Ratio 2.26 1.76
6 Operating Profit Margin (%) 139.13% 90.16%
7 Net Profit Margin (%) (50.44%) 0.54%
8 Return on Net Worth (33.88%) 0.37%

Note :

The ratios are in respect of ordinary activities and hence exclude impact of other comprehensive income.

The variation in Debtors Turnover percentage is due to inordinate delays in releasing the generation proceeds by State Utilities couple with lower turnover in Vankusavade Site in Satara District where realisation is faster as sale is to a third party.

The variation in Interest Coverage Ratio, Operating Profit Margin, Net Profit Margin, Return on Net Worth are attributable to operating loss in FY 220-21 attributable to lower generation, negligible sale of Renewable Energy Certificates and Higher Open Access Costs in Maharashtra.