India, Sept. 16 -- The Union Government has set up a committee to reform Power Purchase Agreements (PPAs) to ensure power availability at competitive prices and make distribution companies (discoms) viable. A PPA is a contract between a generation company (genco) and discom which lays down the terms of electricity purchase by the latter from the former, including the tariff, which is subject to approval by the State Electricity Regulatory Commission (SERC).

The Cabinet is also considering a new tariff policy which will inter alia require discoms to pay a surcharge to the genco for delayed payment, which would be equal to the commercial rate of interest. The Government has already made it mandatory for discoms to open Letters of Credit (L...