The All India Power Engineers Federation has criticised the decision of the Ministry of Power to introduce letter of credit (LC) system, a payment security mechanism to ensure timely payment of dues in lieu of supply of power by producers, without similar protection to power utilities engaged in retail distribution.
President of the AIPEF Shailendra Dubey and general secretary P. Rathnakar Rao said here on Sunday that the system likely to come into force from August 1 would cause an upheaval in the power sector, particularly in uninterrupted power supply to consumers. Most of the distribution companies across the country were not in a position to give required LC in advance due to their poor financial position, even after their joining the Ujjwal Discom Assurance Yojana (UDAY).
Speaking to newspersons, they said distribution companies had to practically make payments well in advance to generating companies as the banks would give LC only in case they had liquidity or if the State Governments concerned gave counter-guarantee. They stated that most of the Discoms would purchase 65% of required power from central generating stations and private producers as generating companies of States were able to meet only 35% of the demand.
They said the delay in payment of dues to power producers by discoms was mainly due to the delay in reimbursement of subsidies given to farmers and weaker sections by the State Governments concerned. The new system would enable the generating companies to en-cash the LC given by discoms after expiry of grace period – 45 to 60 days — as provided in the power purchase agreements (PPAs).
To oppose the Centre's decision, the national coordination committee of electricity engineers and employees would hold a meeting in New Delhi on Wednesday to chart the future course of action on the issue, they said.