Power companies will mandatorily have to snap supplies to state electricity distribution companies that fail to open or maintain bank guarantees with effect from August 1, the Centre said in on order on Wednesday.
Financially weaker distribution companies can open letters of credit for even one day, one week or a fortnight of electricity supply and keep renewing them, said the order issued by the power ministry.
It seeks to curb addition to the outstanding bills of Rs 41,747 crore by discoms. Non-payment of dues by discoms is one of the key reasons for stress in the power sector.
Discoms failing to provide letters of credit in favour of generators will not only be denied that much power but they will also be denied access to spot markets, possibly forcing affected states to resort to power cuts. Read More
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