Power producers will now be able to insure their receivables against non-payment of dues as the insurance sector is open to offering credit insurance cover on the sale of power to third corporate parties.
Credit insurance covers the failure on the part of the buyer to pay up his dues. It is used overseas as a means to arrange credit enhancement from financiers and access cheaper funding, said Andrew Clarke, a senior official from Aon.
Retail sale of power under the Electricity Bill 2001 will open floodgates for power producers. Risk covers will help companies access cheaper funds and achieve financial closure on the back of assured receivables.
More From This Section
All this, however, hinges on the passing of the Bill, which proposes that power producers can sell power directly to a corporate using the power grid by paying wheeling charges.
State electricity boards (SEBs) today are the sole buyers of power, and their poor financial health equally spells doom for the power industry.
The opening of the domestic power sector with producers being allowed to sell directly to corporates will open the doors to insurance companies to take a call on third party buyers, said Essar Group head and vice-president (corporate risk and insurance management) Dinyar M Jivaasha.