Following their failure to pay bills totalling 51 billion ($640 million), nearly half of India’s provinces have been denied access to spot power exchanges. The country introduces new regulations designed to compel states to pay their bills on time.
According to S.R. Narasimhan, chairman of Power System Operation Corp., the nation’s central grid operator, thirteen provinces won’t be able to buy or sell electricity at power exchanges unless they settle their debts to producers and transmission firms. State power retailers that fail to make payments within two and a half months after the day their bills are hiked risk losing access to short-term supplies of electricity, according to rules enacted in June.
The state-run, loss-making retailers in India are frequently viewed as the weakest link in the nation’s electrical supply chain, producing problems that leak down the supply chain to power producers, coal suppliers, and project lenders. These utilities sell around 90% of the country’s electricity, and their late payments are perceived as preventing investments in infrastructure modernisation and dependable power supply.
The government of Prime Minister Narendra Modi, which is developing a strategy to revive these utilities, released new regulations earlier this year that gave the national grid operator the authority to restrict distributors’ access to power sources if they have fallen behind on payments.
According to Narasimhan, access to power exchanges has been restricted for states like Madhya Pradesh, Maharashtra, Chhattisgarh, and Tamil Nadu.
“States will forfeit any opportunistic transaction at the exchanges and be compelled to make up the difference, “based to Rupesh Sankhe, vice president of Mumbai’s Elara Capital India Pvt. Such stringent measures are required to establish payment discipline in distribution organisations.”