VIJAYAWADA: Power utilities in the State issued Letters of Credit (LC) to power generators from August 1 as mandated by the Ministry of Power and Renewable Energy as a payment security mechanism under the Power Purchase Agreements (PPAs). The Discoms, which have outstanding liabilities of about Rs 19,000 crore, however, sought the support of the State government in maintaining adequate flow of cash so that LCs can be opened and honoured.
Officials of APTransco met the Finance department on Wednesday to discuss the issue. Even though the State government had sought some time to launch the LC mechanism and had written to the Union Power Ministry requesting for more time, there was no response.
In this context, the State officials reached a consensus and issued the LCs. “We have sought the support of the government, requesting that our subsidies be released every month. The government has agreed to pay Rs 580 crore as subsidies. We have also requested various departments to pay their dues. If cash flow is there, we can honour the LCs. We have already opened cash credit limits with certain banks,” a top-ranking official from APTransco told TNIE.
The official further explained, “Unless bills are paid promptly, there is a danger of power generators encashing the LCs. So, we have issued LCs to the generators for one week of their power bills.”The LCs would only pertain to the power purchased from Thursday from private and central organisations and hence the generators can’t encash them for the outstanding liabilities, the official noted.The state-owned generating units have been exempted from the LC system and the payments for them could be decided by the respective state governments.