Bharat Coking Coal, a unit of Coal India, the world’s largest producer, is planning a debt-raising to meet expenses, after payment curtailments by power generators led to a cash-squeeze, according to people familiar with development.

The company, based in eastern Indian state of Jharkhand, is in talks with a group of banks to raise as much as seven-billion rupees in bridge loans to keep operations going, the people said, asking not to be named as the talks are still private.

Bharat Coking wasn’t immediately able to respond to requests for a comment.

India’s lockdowns to contain the spread of Covid-19 have led to a slump in electricity demand and revenues for the nation’s already-frail distribution companies. Spot power prices on the Indian Energy Exchange, a proxy for demand, averaged 2.42 rupees a kilowatt hour last month, declining 25% from a year earlier.

That’s choked cash flows up the supply chain, from the distributors to generators to fuel suppliers, including State-backed Coal India and its subsidiaries. Overall shipments by Coal India last month dropped more than 25% from the same period last year.

Bharat Coking meets its working capital needs with payments from customers, the people said. While coking coal is used to make steel, more than 80% of the company’s coal was sold to power plants in the year ended March 2019, according to the latest annual report.

The country’s state power retailers owed 924.2 billion rupees to generators as of end of February, 31% more than a year earlier. All eyes are now on the federal government for a relief plan for state utilities, without which the payments crisis could worsen, according to Debasish Mishra, a partner at Deloitte Touche Tohmatsu in India.

“Structural gaps in the sector still remain. What’s new is the liquidity crunch and the crash in demand,” Mishra said. “Demand can improve when the economy opens up, but there’s an urgent need to infuse liquidity to help generators remain afloat.”

Jindal Power, a unit of Jindal Steel & Power, has been struggling to make routine expenses such as plant maintenance and paying staff salaries, as half of its capacity remains shut, CEO Bharat Rohra said by phone.

“We’re unsure when the distribution companies will pay up. We’re now thinking of selling below cost at the exchanges to meet our routine expenses,” Rohra said. “We’re purely in a survival mode.”