Payment defaults by distribution utilities are causing jitters in the country's power sector.

State-owned NTPC Ltd has now issued a cautionary letter to a couple of Haryana utilities on pending payments. This comes on the heels of the unpaid bills that NTPC faced on account of the two BSES firms distributing power in Delhi.

While the BSES firms managed to avert a showdown by offering written assurances to NTPC after the power major wielded the stick, the private distribution firm is still to settle previous bills raised by at least two other state owned firms — transmission major Power Grid Corporation (PGCIL) and hydro-electric firm NHPC Ltd.

Not taking a chance

Officials at NTPC, which has taken a tough line of action, said the utility is not willing to take any chances on pending payments. “Supply of power can only happen if previous bills are settled. That was the case in Delhi (the two BSES companies). We have now issued cautionary letters to Haryana over non-payment of dues by two state-owned power distribution companies,” an official said. It is estimated that NTPC's August billing of over Rs 330 crore has only been partially settled by the Haryana utilities while the September's billing of Rs 221 crore remains unpaid.

The big fear in the power sector is that a default on payment by one utility could set off a cascading effect. “The losses in the distribution sector are estimated at over Rs 70,000 crore. While the government has chosen time and again to intervene in the petroleum sector to bridge the under-recoveries of oil marketing companies, it has only gone from bad to worse in the power distribution sector. There's a real danger of the whole sector going down like a pack of cards if there are rampant distribution sector defaults,” an energy sector expert with an independent agency said.

Central sector generation firms NTPC and NHPC, and transmission firm such as PGCIL, have a certain degree of comfort with regard to pending payments with State Electricity Boards. This is because the tripartite agreement signed between the Centre, state government and the RBI, provides for discontinuation or reduction in supply in case of default, apart from recourse to Central fund transfer to that State.

‘regulation notices'

In Delhi, NTPC had issued ‘regulation notices' to the two Reliance Infra firms — BSES Rajdhani and BSES Yamuna — that it would discontinue power supply if dues adding up to Rs 814 crore were not settled. The notice was withdrawn only after the two firms gave a written assurance to NTPC that they would unconditionally restore the letter of credit, clear the dues and also undertake to pay the arrear bills in six equal instalments before March 2012.

Apart from the distribution sector defaults, there are emerging worries that generation project developers too could fail to pay lenders as high fuel costs are threatening to derail upcoming projects.

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