State government-controlled power distribution companies (discoms) have started offering letters of credit (LoC) for power purchases as a payment security after the centre mandated them to do so from August 1, 2019.
The discoms are said to have been offering LoCs for power purchases spanning from a week to a month in advance. These LoCs will 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).
