Southern discoms want ministry to defer the LC implementation

: Expressing serious concern over Power Ministry's proposed letter of credit (LC) as payment security mechanism under the power purchase agreement, the Southern Regional Power Committee (SRPC) has requested the ministry to defer the implementation date.

The SRPC held a meeting in Bengaluru recently with its members, power utilities of southern states and a Union Territory Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Telangana and Puducherry.

All southern states and union territories had expressed serious concern over implementation of this order,'' a letter addressed to the secretary (power) Ajay Kumar Bhalla said Tuesday.

Most of the discoms in the region are in deep financial stress and opening and maintaining of the adequate LC as per the power purchase agreement at this juncture may not be viable, the letter said.

The Centre had last month approved the proposal for implementation of a payment security mechanism for purchase of electricity by distribution companies from generating firms.

The power ministry has made it mandatory for discoms to open and maintain adequate letter of credit (LC) as payment security mechanism under power purchase agreements (PPAs) for buying electricity from generating firms from August 1, 2019.

If there is any move to curtail power from the central generating stations or from the private stations for non-opening of LCs, it would be extremely difficult to maintain load generation balance by the utilities, chairman of the SRPC S Selvakumar, who is also managing director of Karnataka Power Transmission Corporation Ltd, said in his letter.

The situation may further aggravate as there would be no access to procure power from power exchanges and short-term open access (STOA), Selvakumar said.

Implementation of the order would have serious ramification specifically in the context of ensuring 247 power to all, the letter said.

As implementation of this order from August 1, 2019 may have serious implications on the power supply position of the states, the ministry may defer the date of implementation of this order, it said.

In the southern region, monsoon has not picked up and hydro storage for reservoirs is 3,137 million units as on July 14 compared to 6,629 million units same day last year, the letter said.