How payment security mechanism works

Counterparty risk from payment delays or defaults by distribution companies (discoms) is a major concern for power producers in India, where 88% of power offtake is through long-term contracts. Discoms' poor financial health impacts the cost of capital for producers and delays payments, threatening business viability. The government has implemented multiple payment security mechanisms, such as letters of credit and state guarantees, to mitigate this risk and protect investor confidence.

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India's removal from GSP list of US

The US Generalized System of Preferences (GSP) promotes economic growth in 121 developing countries by allowing duty-free treatment for nearly 5,000 products. In 2018, $23 billion worth of goods were imported under this program. India was the largest beneficiary, exporting $6.3 billion, followed by Thailand and Brazil.

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Offtake risk in renewable energy sector in India

An offtaker, typically an electricity distribution company, contracts to buy power from producers via Power Purchase Agreements (PPAs). Offtake risk includes curtailment risk, where the plant can't operate optimally, and payment risk, where power isn't paid for on time. Both risks negatively impact revenue and investor returns.

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Role of central and state government in power sector in India

Electricity in India is a regulated sector where both central and state governments share responsibilities. They regulate and operate the electricity market collaboratively. Key stakeholders are involved in policy-making, regulation, and essential market functions like generation, transmission, and operation and more.

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Wholesale power market in India

Wholesale electricity markets enable the trading of electricity before it reaches end consumers, ensuring demand-supply balance and system stability. Key participants include generators, traders, load despatch centres, and distribution companies, all coordinating to buy, sell, and deliver power efficiently to meet consumer needs.

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