State-run NTPC will continue tripartite payment security mechanism (PSM) agreement beyond October 31, 2016 as Power Ministry has accorded its approval for the same.
NTPC Limited is an Indian PSU Public Sector Undertaking, engaged in the business of generation of electricity and allied activities.
“Ministry of Power vide letter dated November 22, 2016 has accorded approval for continuation of the Payment Security Mechanism beyond October 31, 2016,” NTPC said in a BSE filing.
The tripartite PSM agreement among power generators, states and Reserve Bank of India is executed to ensure payments in case of default.
It guarantees that in case of payment default by the discoms, the due amount will be deducted from the centre’s devolution to the states.
“The term of the PSM with NTPC, states and RBI was expiring on October 31, 2016. A large number of states have already come on board to ink the new PSM,” an official said.
Centre had launched UDAY scheme in November last year to revive the debt-ridden state power distribution companies.
The discoms had a debt of Rs 4.37 lakh crore with annual losses of over Rs 60,000 crore when UDAY was launched last year.
In a recent reply to Rajya Sabha, Power Minister Piyush Goyal said that as many as 17 states have joined UDAY scheme.
The scheme allows states to pay debt of discoms along with their electricity boards by issuing bonds.
In the present scenario, PSM will provide payment security to the state-run NTPC and help in its expansion plans.