The Central Electricity Authority (CEA) has found that distribution companies across the country owe dues totaling ₹30.12 billion (~$420 million) to renewable energy projects aggregating 5,982 MW.

Last week, Mercom reported that the CEA is planning to maintain a database of all outstanding dues by DISCOMs to renewable energy generators. Payment delay is a major issue in the Indian renewable sector, and this step taken by the CEA is likely to help entities and stakeholders.

The CEA list will provide information about which state DISCOM payments have been delayed repetitively and over what duration. This will provide investors transparency and a fair idea about which are the high-risk states.

In May 2019, we reported about ongoing payment delays across states, especially in Andhra Pradesh, Tamil Nadu, and Telangana. Some instances in Madhya Pradesh and a DISCOM in Karnataka were also being blamed for long payment delays to developers.

Now, in Andhra Pradesh, the erring DISCOM that has been delaying payments for over a year has eventually led to a situation where billions of dollars in investments are under threat as the state is seeking unilateral revision of power purchase agreements (PPAs). The situation has turned unpleasant with developers opposing the state’s move and seeking legal remedy.

In its letter dated August 5, 2019, the CEA had asked renewable generators to provide the details of such dues every month. They have also been asked to submit their contact details so they can have access to PRAAPTI portal. PRAAPTI stands for Payment Ratification And Analysis in Power Procurement for bringing Transparency in Invoicing of generators. It is an online platform aimed at enhancing transparency and encouraging best practices in power purchase transactions.

When contacted, a government official said, “This move by the CEA coupled with the payment security mechanism that has been set up for renewable energy projects, will provide relief to project developers by assuring payment and ensuring that defaulters are not supplied power. Now, having a backlog of payment cannot be utilized as a leverage point by DISCOMs. Earlier, the generator knew that the DISCOM owes them but still supplied power as any break in supply would have resulted in the DISCOM further delaying their payments. Now, such a delay is penalized.”

We will monitor payment delays closely going forward to find out if the new mechanisms have solved the payment delay issue.

Image credit: Orange Renewable