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

In a move to discipline state-owned loss-making power distribution companies (discoms), the Centre announced that the ‘Letter of Credit’ norm should be mandatorily followed as a payment security mechanism.

It also said that 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 the 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 to open and maintain adequate Letter of Credit as payment security mechanism under power purchase agreements (PPA). The nodal agency for scheduling and supply of power