Withholding payments to IPPs goes against intent of the package: power ministry tells UP

In a strongly worded letter to Uttar Pradesh Power Corporation (UPPCL), the Ministry of Power has urged it not to link early payments to independent power purchasers (IPPs) with the rebates they are requested to offer and advised it to follow the payment system suggested by the ministry earlier.

Stating that the high financial losses of the distribution companies (discoms) cannot be a pretext to demand rebate beyond what is contractually admissible, the letter goes on to say that the commercial interests of the parties are decided as per the power purchase agreement (PPA). The PPA, it noted, is a legally enforceable document and “promoting one’s interest at the cost of another, in contravention of a contract cannot be justified — legally or morally, and that too by a government agency. The ministry added that “reneging on a contract or unilaterally changing it for short term gains would impact the investment climate adversely and not be in the long-term financial interest of the country, including the UP discoms.”