Debt-ridden power distribution companies (discoms) have started defaulting on payments for merchant power, triggering supply cuts that could sink many parts of the country into darkness. In what looks like a throwback to the situation more than a decade ago, discoms from at least two major states ? Uttar Pradesh and Tamil Nadu ? have failed to keep their payment obligations to PTC India, the country?s leading power trader and co-promoter of the fledgling national power exchange.

In 2001-02, the central government had bailed out sinking state electricity boards with a package after they defaulted on payments to central utilities like NTPC and NHPC.

Sources said discoms in UP are unable to clear dues of over R500 crore for power purchased from traders like PTC India, NTPC Vidyut Vyapar Nigam, Adani Power and Lanco Power in recent months. Outstanding dues of Tamil Nadu discoms to traders are in the range of R1,000 crore. With dues mounting, traders might snap supplies to these discoms.

?We have spoken to UP and Tamil Nadu governments for immediate release of payments,? Tantra Narayan Thakur, chairman and managing director, PTC India, told FE. ?There is an urgent need for improving financial conditions at discoms and electricity should be priced (by them) at an appropriate level,? he added. When contacted, a UP power department official, however, said the board was ?up to date on payments and has no arrears?.

Sources in the Tamil Nadu government confirmed that chief minister J Jayalalithaa has written to Prime Minister Manmohan Singh, pointing out the ?alarming situation? regarding unpaid dues of TANGEDCO, the distribution arm of the sate electricity board. The chief minister has requested a bailout package of R40,000 crore to wipe out the discom?s burden, whose current dues are R43,000 crore.

With fresh bank loans drying up, Rajasthan and Madhya Pradesh too have approached the Union power ministry seeking help to bail out their discoms reeling under unmanageable debts. The Centre, which is open to addressing the issue of debt-ridden discoms under the 12th Five-Year Plan policy framework, says defaulting discoms won’t get more loans from government-owned banks and financial institutions.

Peeved at states dragging their feet on power distribution reforms including tariff rationalisation, the power ministry has also proposed counting the losses of discoms (or SEBs if the discoms are not separated from them) towards the fiscal deficit of the respective state.

While Gujarat chief minister Narendra Modi has come to the rescue of Tami Nadu and offered 500 MW from November under a bilateral contract, UP has no one to turn to.

According to sources, some traders have reduced power supply to defaulting states to minimise commercial risks. They are not participating in tendering for short-term power by these states either. If they have refrained so far from cutting off power supply, it is only because they do not want to snap business ties with them.

Recently, Adani Power, which supplies about 400-600 MW to UP as a trader on behalf of the Gujarat government, sent a disconnection notice to the state discom when dues touched R500 crore. It later withdrew the notice when the discom paid part of the

dues and promised to clear the balance soon. However, Adani has reduced power supply to the state.

UP is needs to buy at least 1,000 mw from the free market to avoid heavy load-shedding. Similarly, Tami Nadu is also facing power deficit of 1,500 MW.

Normally, power-deficient states can buy from electricity exchanges, but coal shortage has pushed up prices in October. Moreover, cash payment is required to buy power through this route. So, the states are caught in a bind. Overdrawal from the power grid could invite penal action from the Central Electricity Regulatory Commission. As a result, these states are resorting to heavy load-shedding.

However, there is no such problem in states like Maharashtra and Gujarat where tariffs reflect the cost of power purchased by discoms.

?There is no default by discoms on power purchased from the free market,? Maharashtra Electricity Regulatory Commission VP Raja told FE.

Karnataka Power Corporation (KPCL) is the power generating company in Karnataka and the power produced in the state is supplied through five discoms. State government sources said except one discom ? BESCOM ? which owes around R5,500 crore to KPCL, others have negligible unpaid dues to suppliers.

(with inputs from Jaishankar Jayaramaiah in Bangalore and Sajan Kumar in Chennai)