MUMBAI, Sept 6: The panel formed under chairman of the Central Electricity Authority (CEA) to explore prepaid payments by state discoms to independent power producers
(IPPS) has suggested setting up an e-platform for discounting of bills on the lines of the system being used by MSMEs.
In February this year, the government had constituteda panel under the CEA to explore prepaid payments options bystate electricity distribution companies, which are known fordelayed payments, to power plants.Following this, in June, the Union power ministry hadmandated state-run discoms to offer letters of credit (LCs)against their power purchases as a payment security fromAugust 1.Since then most discoms have started issuing LCs.The panel was headed by CEA chairman Prakash Mhaskehad members from the Union power ministry, power producers andtwo state-run discoms.Cash-starved state discoms, it can be noted that, oweover Rs 51,000 crore in arrears to private sector powerproducers, leading to the over Rs 3 lakh crore bad loans among30 producers in the power sector, which are still awaitingresolution.
The arrears were close to Rs 72,000 crore in December2018.The committee in its report, PTI has a copy of thesame, has recommended creating an e-platform for discountingof bills for generation companies wherein commercial banks canact as financiers.“This platform will be similar to the trade receivablediscounting system (TReDS) being used for discounting ofinvoices by MSMEs,” says the report.The panel has also recommended 50 percent advancepayment of the estimated bill for generating stations usingfuel such as coal, lignite or gas.“In other cases, the advance payment can be 25 percentof the estimated bill amount,” say the committee report.The committee has also recommended that the statesformalise an arrangement for direct transfer of dues fromother government departments to their respective discoms.
An industry expert, however, opined that therecommendations are regarding future payments and is silent onthe dues.So the government needs to set up a mechanism for thedelayed payments already stuck with the discoms.
“The dues are to the tune of Rs 51,000 crore.The government plans to direct discoms to issue LCs isa positive step, but what about the past dues.The government will have to take immediate steps inthis regard,” he told PTI.Under the arrangement, LCs will be invoked if thediscom defaults beyond the 45-60-day grace period, as providedin the power purchase agreements.The government has made it mandatory for powerdistribution licensees to open and maintain adequate lettersof credit as a payment security mechanism under the powerpurchase agreements.Under the proposed LC model, the national, regionaland state load dispatch centres are directed to supplyelectricity only after they are informed by the producers andthe discoms that an LC for the desired quantum of power hasbeen opened and the copies of the same are made available tothe generating company concerned.
The dispatch centres will be informed about the periodand the quantity of power supply.The dispatch shall stop once the quantum ofelectricity under the LC has been supplied.The Centre later relaxed some of these provisions andexempted discoms from offering LCs before procuringelectricity from state-run generation companies. (PTI)
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