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The central government has asked power producers to seek weekly payments from electricity buyers to ensure adequate cash flow amid surging coal costs due to higher imports, reported Reuters.

According to the news agency, the power ministry has invoked an emergency clause in the electricity law to enforce the change in payment mechanism.

The move is expected to put more pressure on power distribution companies (discoms) that are already saddled with debt. 

Discoms have had to ensure payment of at least 15% of the provisional bill to electricity producers within a week to power generating companies and state. If they defaulted, the power producers could sell 15% of their output to electricity exchanges.

Power plants, most of which have long-term agreements with discoms to sell electricity at fixed rates, have been allowed to pass on higher costs due to imports.

India's power tariffs, set by the respective states, are among the lowest in the world, as state-run distribution companies have absorbed higher input costs to keep tariffs steady. This has left many of these companies deeply indebted.

The companies' strained balance sheets have consistently triggered delayed payments to power producers, often hurting cash flow and further investment in the electricity generation sector.

If the distribution companies pay on time it would benefit companies, including Adani Power, Tata Power, Reliance Power, Jindal Steel and Power, Torrent Power and Sembcorp.

Financial dues of power discoms 

The power ministry on Wednesday said that it is working on a scheme to mitigate the financial woes of the discoms that are unable to pay their dues.

The scheme includes allowing discoms to pay dues in up to 48 monthly instalments. They owe 1,00,018 crore as on 18 May to the power generating companies.

Previous attempts by different governments to reduce debt levels of distribution companies have had little success.

 

 

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