Discoms get relief as Andhra HC stays Centre’s order

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Hyderabad | Published: October 17, 2019 5:46:35 AM

Effective August 1, it has been mandatory for discoms to open/maintain bank guarantee to buy power from gencos.

public sector power generators india, NTPC, dues on discoms in india, NLC India, THDC India, NHPC, Damodar Valley Corporation, Adani Power, Bajaj Group owned Lalitpur Power Generation Company Ltd, GMRIn its interim order, the court also stopped the power ministry from disallowing AP-based discoms to buy power through the open access system and on the power exchanges.

In a move that could undermine the Centre’s efforts to ensure payment discipline among state power distribution entities, the Andhra Pradesh High Court on Wednesday stayed the Union power ministry’s order making it mandatory for the state’s discoms to provide letters of credit (LCs) in favour of wind and solar power producers for purchase of power.

Though the court’s order is specific to the LCs with regard to the renewable units Andhra Pradesh buys power from and is in view of the fact the LC condition was waived by these units in the relevant power purchase agreement (PPA), it could be cited as a precedent by other states.

In its interim order, the court also stopped the power ministry from disallowing AP-based discoms to buy power through the open access system and on the power exchanges.

It kept the central energy ministry’s order in abeyance for a period of three weeks and posted the case to November 5 for next hearing.

A petition was filed by discoms of Andhra Pradesh challenging the proceedings of the Ministry of New and Renewable Energy (MNRE) in this regard stating that it is not possible to issue LCs to the solar and wind power producers in the wake of financial crisis in the discoms. “The action of the Union government amounts to rewriting the terms of the PPA between discoms and the power producers,’’ the government argued.

To recall, the Jaganmohan Reddy government in the state had decided to revisit the PPAs with wind and solar developers and revise the tariff structure alleging irregularities by the previous government. “This is a big relief as the state is reeling under severe coal shortages at its thermal power stations and electricity is procured through short-term open access and power exchanges to meet the daily needs,’ said an official from the state’s energy department.

The MNRE had issued directions to Andhra Pradesh, through Power System Operation Corporation Limited (POSOCO), under the power ministry, to the state load dispatch centre asking it to provide renewable energy developers with LCs by October 15. If it failed to do so, according to the order, it shall face the prospect of losing the right to transact in power exchange and short term open access.

Effective August 1, it has been mandatory for discoms to open/maintain bank guarantee to buy power from gencos.

Meanwhile, to give relief to the state’s discoms, the AP government on Wednesday approved issuance of bonds of worth Rs 4,741 crore by by Andhra Pradesh Power Finance Corporation to finance the discoms.

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