Why giving open credit (payment) is now dangerous in power sector? Part 1

As most of us are aware Power sector is already reeling through heavy debts due to delay in payments from electricity boards/utilities. Unfortunately financial position of these boards are not going to improve due to political interference like subsidies on electricity bills. 

Hence most of the businesses in power sector are going through financial crunch. Sometimes it is very difficult to find the actual financial position of the companies in power sector. And unknowingly is supplier has given open credit he is taking a very big risk.

Especially now after NCLT proceedings coming into picture it is more difficult for operational creditors to recover 100% payments. Most of us don't know against which EPC- NCLT proceedings are going on. Under NCLT proceedings if any company is declared insolvent and if it does undergo liquidation it will be very difficult for the operational creditor (Financial creditor and later employees have first right of recovery) to recover his payments. Under current situation it is best advisable to do business with secured financial transactions even though if sales reduce. 

Better safe then notional sales growth.

To be continued..

#credit #powersector #NCLT #Safe