India's solar power developers may be deterred from participating in state tenders because distribution companies are still not issuing letters of credit (L/Cs) as a payment security mechanism.

The National Solar Energy Federation of India (NSEFI) has warned the ministry of power that the distributors' reluctance to put up L/Cs will deter investment in India's strategy to increase its renewable power generating capacity.

Formal letter

NSEFI has formally written to power minister Raj Kumar Singh to point out that India's state-owned distribution companies are not issuing L/Cs, even though the ministry has told them to do so.

The federation says the "majority of state discoms [power distribution companies] have not provided L/Cs as per the ministry of power's order for projects connected to state load dispatch centres (SLDCs) till date."


SLDCs are still scheduling power to distribution companies without payment security mechanisms in place, according to NSEFI, which says this is in direct violation of the power ministry's order.

NSEFI has warned the ministry that this could deter developers from participating in state solar tenders and has asked the ministry to direct SLDCs to take stringent steps against power distributors that fail to put up L/Cs as payment security.

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