Indian Economy
Package For Power Stations
- 03 Sep 2019
- 2 min read
The Power Ministry is keeping a check on possible misuse of the rescue package for stressed coal-fired power stations.
- The package was announced earlier in March 2019, wherein coal linkages of power plants (with aggregate capacity of 40,000 MW), that cancels Power Purchase Agreements (PPAs) because of payment default by discoms, were to be valid for two years.
- This was done to allow generation companies adequate time to look for alternative PPAs.
- After the two-year period, the coal linkage will be cancelled in case the generator is not able to secure a long- or medium-term PPA within that period.
- Distribution company (Discom) dues is one of the biggest issues in the country.
- To deal with the same, from 1st August, 2019, the government has made it mandatory for state distribution companies (discoms) to offer letters of credit (LC) as part of the payment security mechanisms in power purchase agreements (PPAs). A letter of credit is a document that guarantees the buyer’s payment to the sellers.
- National, Regional and State Load Dispatch Centres are directed to dispatch power only after they are told by the Discoms that a LC for the desired quantum of power has been opened and copies have been made available to the concerned generating company.
- These LCs can be invoked if the Discom defaults in payments to the power generation company (Genco) beyond the 45-day or 60-day grace period for clearing dues, as provided in the power purchase agreement (PPA).
