This summer, the Central power regulators are arming themselves with new tools to extract fines from states for overdrawing power and making the grid unstable.
The Central Electricity Regulatory Commission (CERC) is for the first time introducing the system of Letter of Credit in transactions with states after realizing that errant states often give them the slip instead of clearing the dues for drawing power from the grid.
Without any mechanism to extract the dues, the CERC guidelines against overdrawal, strict as they are, have been practically ineffective.
The Letter of Credit will be issued from the banks of respective states in advance. They will carry the precondition that if the states do not voluntarily clear their dues within a week, the CERC will get the funds transferred automatically from the banks.
“Earlier we used to work on goodwill alone but that has clearly not worked,” said a senior CERC official who did not wish to be named citing protocol issues. “Jammu and Kashmir, for instance, is yet to clear hundreds of crores of rupees it owes CERC, while Uttar Pradesh has challenged its dues in the high court.”
For Delhi, all this means one of the major reasons for frequent power cuts in summer—low frequency in the Northern grid due to overdrawal by other North Indian states—will be expectedly reigned in.
And even if this system failes to check the "rogue staes" in the long run, the Union Power Ministry is considering imposing its own penalty for overdrawal.