The Government of India (GOI) has approved a relaxation for Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) that have been tasked with managing the liquidity crisis of the distribution companies.

Distribution companies (DISCOMs) in the top renewable energy generating states of the country are the biggest defaulters when it comes to paying dues for the power procured from renewable projects (wind power, solar and hydro).

According to the Central Electricity Authority (CEA), up to July 31, 2019, 376 renewable energy generating projects across India had dues totaling ₹68.72 billion (~$960.7 million). These 376 projects account for 17,897 MW of renewable energy generating capacity.

Renewable Energy Dues

Out of the total dues owed, DISCOMs in Andhra Pradesh, Telangana, and Karnataka are responsible for 70% of the total amount. This data is crucial for planned and phased growth of the renewable energy sector in India as it will help demarcate problem states and DISCOMs that do not value the sanctity of power purchase agreements.

This also shows that the problem of payment delays is adversely affecting the National Thermal Power Corporation (NTPC). When contacted, an NTPC official said, “For a few projects, we have entered PPAs with the generators and PSAs with the state DISCOMs. If the state doesn’t pay us on time, our payment to generators gets delayed. We are working on it to bring it to zero.”

In mid-August, Mercom reported that the initial data made available to the CEA showed that DISCOMs owed dues totaling ₹30.12 billion (~$420 million) to renewable energy projects aggregating 5,982 MW. Since then, the numbers have increased exponentially. This also shows that the Ujwal DISCOM Assurance Yojana (UDAY) program hasn’t been able to alleviate the financial problems of DISCOMs across the country.

At the beginning of August 2019, 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 is expected to 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 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.

In May 2019, Mercom reported about the 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.