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Amendments and Bailout scheme may provide a sigh of relief to Discoms

With Distribution segment of power sector whirling to become weakest link in the power segment, government nods to amend Electricity bill Act, thereby preventing states to renegotiate PPA signed with Discoms, focus has been primarily on the renewable energy PPAs. This amendment was set out in amidst of Andhra Pradesh attempt to renegotiate already executed solar and wind PPA, which dismayed developers and investors and presented a wide of the mark image in global economy.

Discoms outstanding swelled to 82,000 crores and government's attempt to open letter of credit has made insignificant impact on timely clearance of bills. Huge accumulated dues also poses a concern on long-term viability of power sector. To revive discom government plans for a bailout scheme to provide grant of 1.1 Lakh Crores to state discoms, that would mandate those with high losses to either privatise operations or appoint distribution franchisees and invest in infrastructure upgradation.

Proposed amendment is poised to empower regulatory commission to enforce PPA executed between renewable energy power generator and discoms. Other concerns like delay in adoption of tariff by regulators, AT&C losses etc are likely to be addressed in the proposed amendments.