Power Ministry eases payment norms for Discoms

Our Bureau New Delhi | Updated on July 24, 2019

The Power Ministry has clarified that power distribution utilities can procure electricity from State government-owned power generation utilities without offering a Letter of Credit as an immediate payment assurance, in an official statement.

Of the country’s 358 GW installed power generation capacity, 105 GW are controlled by State governments. The rest is shared by Central government power generators (such as NTPC) and private power companies.

This may be seen as a relief to financially burdened power distribution companies (Discoms) who can now continue having easy settlement options for some power purchases they make.

On June 28, the Power Ministry had made it mandatory for Discoms to provide a payment assurance to power generation companies (Gencos) before procuring electricity. The Load Dispatch Centres (LDCs) were directed to allow power dispatch only after a copy of the Letter of Credit was provided to them. Power Ministry officials said that this was an attempt to rein errant Discoms that were not making timely payments to Gencos.

On Wednesday the Power Ministry clarified that these rules do not apply to State government-owned generating stations. “The payments for these State-owned Generating Stations may be as decided by the respective State Governments,” an official statement said.

The Letter of Credit mandated to be offered by the Discoms will be routed through the banking system. It is in the form of an assurance from a bank to pay the Genco if the Discom defaults on payments.

Published on July 24, 2019

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