The 82,000 Crore Backlog: Centre May Bring Law To Get State Discoms To Honor Power Purchase Pacts

The government is planning to introduce a bill in the upcoming budget session of the Parliament to amend the Electricity Act in a bid to prevent states from reneging on power agreements, especially related to renewable energy, and distribution companies (Discoms) from defaulting on bills, reports Economic Times.

According to the report, the Centre wants to make sure that tariffs for renewable energy are not changed after execution of contracts, and that electricity regulatory commissions have more authority to enforce power purchase agreements (PPAs) between projects and discoms.

The proposal comes after refusal of the new governments in Andhra Pradesh and Maharashtra to honour the PPAs, leaving investors jittery.

The power ministry has been asking the Andhra government to refrain from renegotiating renewable power pacts to avoid sending wrong signals to domestic and foreign investors.

“An ordinance was being considered earlier as liquidating outstanding dues of discoms is a pressing issue. The power ministry’s earlier initiative of mandating discoms to open letters of credit has worked and there are no fresh dues. But the accumulated dues have to be settled to ensure viability of power producers and the sector,” a senior government official was quoted in the report as saying.

The bill may be introduced in the upcoming budget session after being cleared by the Union Cabinet. The budget session will be held in two phases - from 31 January to 11 February and 2 March to 3 April.

The amendments aims to give more power to the electricity regulatory commissions to ensure enforcement of PPAs between the discoms and the power plants.

The relevant section of the Electricity Act will be altered to ensure that parties to the contract do not stop supplying or offtaking electricity even in case of a dispute, till the time it is settled.