Ailing discoms seek more time from MoP

HYDERABAD: Electricity distribution companies (commonly known as Discoms) in the Southern Region (SR), that are under deep financial stress, are admitting to their inability to comply with the Ministry of Power’s (MoP) order regarding the opening and maintaining adequate letter of credit (LoC) as part of the payment security mechanism in power purchase agreements.

The order aims to help generation companies, known as Gencos, by assuring payment in lieu of power supply. Southern Regional Power Committee (SRPC) Chairperson S Selvakumar wrote to the Secretary, MoP on Tuesday, listing out the Discoms’ troubles.

The new system is supposed to be implemented from August 1 this year. The SRCP wants this date to be deferred. In his letter, the SRPC chairman told the Ministry: “All States in the Southern Region have expressed serious concerns over the MoP’s order.”

The MoP had mandated that the Letter of Credit (LoC) to be offered by Discoms would be routed through the banking system. The LoC is a guarantee to Gencos in case the Discoms fail to pay up. However, the banks would give such an LoC only if Discoms cut their losses and become more efficient in collecting payments from customers. The Discoms, whose books are already in the red, are in no position to accept the new system immediately.

In the letter, he said: “Most Discoms in the Southern Region are under deep financial stress and opening and maintaining adequate LoC as per the power purchase agreement (PPA) at this juncture may not be viable. If there is any move to curtail power from the Central generating stations or from private stations for non-opening of LoCs, it will be extremely difficult to maintain load generation balance by utilities. Implementation of the order would have serious ramifications specifically in the context of ensuring 24X7 power to all.”

The SRPC chairman further said that in the Southern Region the monsoon is yet to pick up. He said storage in reservoirs was 3,137 MU on July 14, 2019, compared to 6,629 MU at the same time last year.

Will the TS govt help?
In case the MoP does not defer its order and implements it from August 1, the State government will need to give some money to TS’ Discoms. Sources said TS power utility officials requested the government for Rs 1,000 crore. TS Transco and Genco CMD D Prabhakar Rao was not available for comment