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.
visit ****s://****.ceew.in/cef/quick-reads/explains/how-payment-security-mechanism-works
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