Agencies

NEW DELHI: Some state distribution companies are making a last-minute dash to banks for funding ahead of the Centre’s August 1 deadline, after which they will not get electricity supply unless they provide bank guarantees for payment, but authorities in several states say they are confused about how to go about it.To tame defaulting distribution companies (discoms), the Centre had ordered on June 28 that in case discoms do not open or maintain the line of credit in favour of a power plant, the regional load despatch centres will not despatch power to the state. Generating companies will still be paid fixed costs — a key component of the tariff, apart from variable generation costs — but discoms will not even be able to buy from shortterm markets.Although a state’s own generating unit is exempted from the order, discoms are worried because they need a lot of electricity from central or private plants to fully meet demand. Some discoms are trying to maintain guarantees for short periods of time but both buyers and sellers are confused about how this will help because defaults are known only after a monthly billing cycle is completed.However, a power ministry official said all clarifications have already been made and states are getting prepared. The industry is also worried about states diverting coal and operating own inefficient power plants that are spared from the order.A senior executive from Uttar Pradesh told ET on condition of anonymity that the state has sought about Rs 100 crore from financial institutions to open the letter of credit.Utilities in Rajasthan have started working on it too and have asked its State Bank of India for an immediate additional credit exposure of Rs 863 crore. “The extension of credit will be done in two phases. We have immediately written to the bank for an additional credit exposure of Rs 863 crore. The credit extension of remaining amount will be done in the second phase. The letter of credit will be valid for a year,” said a senior finance officer of Jaipur discom, requesting not to be identified.Officials of Maharashtra and Gujarat said their discoms are prepared for the implementation of the order.Distribution companies of most southern states are undecided over the period of opening the bank guarantee. Tamil Nadu is considering a 15-day letter of credit, while Andhra Pradesh is also mulling a shorter duration.It further said that the order is credit positive for electricity generators but its implementation will face problems such as creation of letter of credit in a short span, repercussions of stoppage of power and financial impact on stakeholders.(With inputs from Rituraj Tiwari in New Delhi)