Andhra Allocates ₹5.57 Billion Towards Payment Security Mechanism for Power Purchase

The state government of Andhra Pradesh has set aside a sum of ₹5.57 billion (~$79 million) towards payment security mechanism as notified by the government recently.

The amount will be paid directly to the central power generating stations. According to a communique reviewed by Mercom, all the projects for which funds have been set aside belong to the National Thermal Power Corporation (NTPC). They are either coal-based projects, solar photovoltaic (PV) projects or those developed under the state bundling program.

The drawing and disbursing officer of the state’s energy department will remit the amounts in the bank accounts of the central power generating stations.

Recently, Minister for Power R. K. Singh had announced that it would be mandatory for DISCOMs to open and maintain adequate Letters of Credit as the payment security mechanism under power purchase agreements.



Later, the  Ministry of Power issued procedural guidelines for the scheduling of power to distribution companies in case of non-maintenance of the line of credit under the payment security mechanism. According to these guidelines, power will be scheduled for dispatch after a written communication is provided to the load despatch center that the letter of credit for the power to be supplied has been opened. The communication must specify the duration of supply. This communication will be provided by the DISCOM and confirmed by the power generator.

Beginning of August 2019, Ministry of New and Renewable Energy (MNRE) had issued a clarification regarding fixed charges in the newly issued payment security mechanism regulations. In the case of solar, wind, and small hydro projects, the fixed charge will be the tariff at which power is purchased by the distribution company. It was also clarified on how energy will be charged during the non-dispatch of power.

Mercom previously reported that payment delays are becoming a problem for solar and wind project developers in India, especially in Andhra Pradesh, Tamil Nadu, and Telangana. Some instances in Madhya Pradesh and a DISCOM in Karnataka are also being blamed for long payment delays to developers.

Image credit: NTPC