In an attempt to ensure timely payments by India's states to power generation utilities, the Indian government has made it mandatory for state electricity distribution companies to provide letters of credit (L/Cs) to guarantee they deliver the requirements specified in their power purchase agreements (PPAs).

The ministry has also proposed a power sector council to address power sector issues between the federal and state governments as part of its 100-day action plan for the second term of Prime Minister Narendra Modi's government.

L/C arrangements

To operationalise the government's mandate, the power ministry has issued a directive to the National Load Dispatch Centre and regional load dispatch centres.

They have been ordered to "dispatch power only after it is intimated by the generating company and distribution companies that an L/C for the desired quantum of power has been opened and copies made available to the concerned generating company."

Power sector reforms

Other proposals to reform the sector include the separation of electricity generation, transmission and distribution companies.

The establishment of pan-India power distributor and renewable energy management centres are also being contemplated.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.