Govt bars defaulting discoms from short-term power purchases in open market

Letter of Credit to be mandatorily used as payment security mechanism for long-term PPAs signed by loss-making discoms

The Centre in a bold move to discipline the state-owned loss making power distribution companies (discoms) announced that the ‘Letter of Credit’ should be mandatorily followed as a payment security mechanism. At the same time, it also said the discoms which default on their payment to power generators (gencos) under any long-term agreement should not be allowed to purchase short-term power from open market.

In a public statement, the ministry of power said R K Singh, minister of state for Power and New & Renewable Energy and Skill Development & Entrepreneurship has approved the proposal to make it mandatory for discoms