Payment Security norm to strain weak Discoms’ financials

KOLKATA: Power ministry’s directive, asking all distribution companies to open and maintain sufficient letters of credit as payment-security mechanism may lead to an additional working capital requirement for all state distribution companies since it will shorten the prolonged credit periods that discoms have enjoyed by deferring dues to generators, CRISILNSE 0.14 % has estimated. It will also lead to increased financial charges for implementing regular letters of credits.

CRISIL is of the opinion that while ensuring payments to generators is the right step, lack of wherewithal of discoms could impede smoother implementation and worsen the situation of already-weak state utilities.