Discoms in South ask MoP to defer payment security move

TS needs over ₹1,025 cr LC every month to pay CGSs for power

July 16, 2019 11:01 pm | Updated 11:01 pm IST - HYDERABAD

The Power Distribution Companies (Discoms) and other utilities engaged in the retail sale of energy to consumers in the southern States have requested the Ministry of Power (MoP) to defer the implementation of payment security mechanism under power purchase agreements from August 1 without a similar system in place for Discoms.

While taking the major decision during the last week of June, the MoP stated that the payment security mechanism “will change the system and the sector will become viable”. The mechanism makes it mandatory for the power distribution licensees to provide adequate letter of credit (LC) to the power producers to ensure timely payments for power purchased.

At a recent meeting of the Southern Regional Power Committee (SRPC) held in Bengaluru, the power utilities of southern States and a Union Territory — Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Telangana and Puducherry with 12 utilities engaged in power distribution — have expressed serious concern over the MoP’s decision and asked the committee to defer the implementation of payment security mechanism.

In a letter addressed to Secretary MoP Ajay Kumar Bhalla on Tuesday, Chairman of the SRPC S. Selvakumar, who is also the Managing Director of Karnataka Power Transmission Corporation Ltd., pointed out that the Discoms in the southern Region were in deep financial stress and opening and maintaining adequate LC at the present juncture was not viable.

24x7 power

He further stated in the letter that implementation of the payment security mechanism would also have serious ramifications in ensuring 24x7 power to all, as envisaged by the Centre. “Any move to curtail power from the Central or private generation stations for not maintaining LCs will make maintaining load-generation balance extremely difficult and it will also impact short-term open access in procuring power,” the letter explained.

A senior executive of a Telangana power utility told The Hindu that there were several problems in maintaining required LC in the present circumstances of Discoms running in losses. Citing an example, he stated: “We require over ₹1,025 crore LC every month for payment against supply of over 2,300 MW power by Central generating stations (CGSs) alone. Besides, it’s also difficult to get such a huge LC from bankers.”

The SRPC Chairman also suggested in his letter to MoP Secretary that enabling a similar payment security mechanism for Discoms on the lines of railways, coal companies and now power producers was necessary before implementing it, although it was mandated in the Electricity Act, 2003. Hydel generation in the southern region did not pick up so far this year due to poor monsoon and the generation was only half the normal extent during the mid-July period.

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