Power producers pull plug on truant discoms

Feb 13 2013, 02:18 IST
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Not just lenders but power producers too have started cracking down on financially troubled distribution companies. Not just lenders but power producers too have started cracking down on financially troubled distribution companies.
SummaryNot just lenders but power producers too have started cracking down on financially troubled distribution companies.

Not just lenders but power producers too have started cracking down on financially troubled distribution companies. Even private discoms, known for their relative ability to price power remuneratively, are finding themselves at the receiving end as generators have started snapping supplies for any delay in payments.

State-owned NTPC and Damodar Valley Corporation (DVC) and private firms like Tata Power and Lanco Power are among producers which have started or planning to start supply cuts to defaulting discoms in order to force them to pay up. The move comes at a time when the Centre and states are discussing contours of a massive debt recast scheme for discoms contingent on reforms, including timely tariff hikes and privatisation.

Discoms are required to maintain letters of credit (LC) under the power purchase agreement (PPA) to ensure timely payment to power suppliers. But in recent weeks, several financially-distressed discoms have failed to honour this key contractual condition, forcing generators to issue disconnection threats. In the latest case, NTPC has just served a 90-day notice to BSES discoms in Delhi BSES Yamuna Power and BSES Rajdhani Power for electricity supply disconnection over discoms failure to replenish the LC account in time. Even when the discoms have no dues to the generators, the power major is within its right to issue the notice under the Power Regulation Act 2010.

In the absence of a cost-reflective tariff over the past several years, Delhi discoms are under financial stress with accumulated recoverable revenue gap of about R20,000 crore, a BSES spokesperson said. Both Delhi and DVC had also used similar threats earlier to resolve payment issues with the BSES discoms.

DVC is facing payment delays for power supplied to BSES discoms and may also be forced to issue notice for disconnection.

The two discoms together owe about Rs 250 crore to the public sector generator for power supplied by it. DVC chairman RN Sen has sought intervention from Shakti Sinha, principal secretary, power, Delhi government, in this matter. If the issue of payment of outstanding dues by BSES discoms does net get resolved, we will be forced to issue them notice to discontinue power supply, Sen told FE.

Private power companies like Tata Power and Lanco Power too have issued power regulation notices to their customers. While Tata Power has recently served notice to halt power supply to Rajasthan discoms from the

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