Pathetic State of Indian Distribution Utilities exposed in SECI's Help to TN

The Indian power sector has a huge perennial problem of non-payment by its Indian distribution utilities to power producers. The reason is that most of these organizations have a huge debt burden which keeps on growing every year. Due to India’s unique political situation, most states heavily subsidize consumers to the tune of billions of dollars every year. This burden mostly falls on the utilities which do not get the support from their state governments on time. As a result, these utilities do not pay their creditors on time leading to a problem of capital across the power supply chain.

TANGEDCO which is the Tamil Nadu distribution utility has asked SECI to help it with solar and wind power tenders as bidders have stopped responding to its tenders. Putting out solar and wind tender is not exactly rocket science but the Indian renewable energy developers who are not receiving the payments for their already built renewable energy plants are reluctant to build anymore. They do not trust the utility. TANGEDCO thinks that SECI is a more trusted party and it may get a better response from the bidders even if it takes around 2-3% commission for providing this service.

Also, read SECI’s Solar Manufacturing Tender Receives One Bid despite Numerous Extensions

It has recently been noted that a number of states especially Telangana, Tamil Nadu, Andhra Pradesh, etc. have not been making payments for a period greater than a year putting the power producers under severe duress. Given that most renewable energy plants are being built at wafer-thin margins, this is a huge risk for all investors in the renewable sector in India. While solutions like a central guarantee fund could have been bandied about for a long time, the problem has not been solved yet and continues to fester like an open wound.