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HC directs Escoms to clear dues to power generators without delay

Direction comes after it was observed that some Escoms had not honoured their obligations

The High Court of Karnataka has directed all State-owned Electricity Supply Companies (Escoms) to henceforth make prompt, regular and timely payments in favour of the power generators without any delay in relation to all future bills/invoices of the power generators.

Also, the court directed Escoms to forthwith open/renew monthly irrevocable letters of credit in terms of the Power Purchase Agreements (PPAs) in favour of the power generators to enable and ensure payments of all amounts due to the power generators from Escoms. Besides, the court said that all Escoms should honour and discharge their duties, obligations and liabilities under the PPAs between the power generators and Escoms.

Justice S.R. Krishna Kumar issued the general guidelines for all Escoms after observing that Hubballi Electricity Supply Company Ltd. (Hescom) and Gulbarga Electricity Supply Company Ltd. (Gescom) had a consistent pattern of failure to make payments to various wind and solar power generators.

The court passed the order on the petitions filed by Renew Power Pvt. Ltd., and several other companies seeking directions to Hescom and Gescom to make payment of around ₹250 crore due to them though there was no dispute over the amount payable.

The two Escoms contended that the petitioner companies could not knock the doors of the court as they had to first approach the tribunal as per the PPA. Non-payment of dues by local bodies and the State Government had resulted in default in payment due to power generating companies.

However, the court found that there was no dispute about amount payable as Escoms had not disputed the bill/invoice submitted by the petitioner companies and hence there was no bar on the court to entertain the petitions.

“…failure to make payments in a timely manner has serious ramifications on the petitioners’ ability to continue to generate energy…,” the court observed while noticing that the Ministry of New and Renewable Energy in April 2020 had asked all Escoms to pay dues to renewable energy generators regardless of the moratorium granted to Escoms in the wake of COVID-19.

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