A generator ships power into the grid every day, invoices the distribution company on schedule, and still watches its receivables climb. Across India, the gap between what DISCOMs owe generators and what they pay on time has become one of the most persistent sources of friction in the power sector and increasingly the subject of arbitration rather than negotiation.
Two Kinds of Dispute, Two Different Doors
Not every disagreement with a DISCOM is the same kind of claim, and the door it goes through depends on which kind it is. An energy dispute arbitrator first asks whether the dispute is a tariff dispute, meaning it directly affects the price paid for power or a non-tariff dispute over something else in the contract, such as termination, delay or a payment mechanism. The Electricity Act, 2003 draws this line deliberately. Section 79(1)(f) gives the Central Electricity Regulatory Commission jurisdiction over inter-state tariff disputes between generating companies and transmission or distribution licensees, while Section 86(1)(f) gives the same power to the State Commission for intra-state disputes. Both provisions let the Commission adjudicate the matter itself, or refer it to an arbitrator it appoints.
The Supreme Court settled much of the ambiguity here in Gujarat Urja Vikas Nigam Ltd v. Essar Power Ltd, holding that Section 86(1)(f) is a special provision that displaces the ordinary route to arbitration under Section 11 of the Arbitration and Conciliation Act, 1996. A licensee cannot simply invoke an arbitration clause in its PPA and go to Section 11; disputes touching tariff are channelled through the Commission, which alone decides whether, and to whom, they are referred for arbitration.
Where Party Autonomy Still Applies
Non-tariff disputes sit on the other side of that line. Once a Commission has approved a power purchase agreement and its arbitration clause, that approval is treated as the Commission exercising its statutory jurisdiction, so non-tariff disagreements, such as an alleged breach of a payment security mechanism or a dispute over termination, are ordinarily bound to be referred to arbitration under the agreed clause. An infrastructure dispute arbitrator handling a power project therefore has to read the contract and the correspondence carefully before advising a client which forum actually has jurisdiction, since getting the characterization wrong can cost a claimant months, or the case entirely.
The same care is needed where the generator itself is a joint venture or a special purpose vehicle set up between a developer and its equity partner, as most large generation projects are. A dispute over cost overruns, funding shortfalls or an exit can surface at the same time as the DISCOM claim, and a joint venture dispute arbitrator is usually the one asked to untangle whether the shareholders’ dispute has any bearing on the project’s claim against the DISCOM, or whether the two should proceed on separate tracks.
The Money at Stake
The scale of DISCOM arrears explains why this question is not academic. Ministry of Power data on the PRAAPTI portal showed distribution companies owing generators roughly ₹616 billion at the start of 2025, after peaking above ₹672 billion the previous December. The Electricity (Late Payment Surcharge and Related Matters) Rules, 2022 address this directly, requiring a rising surcharge on overdue bills and letting pre-existing arrears be repaid in up to forty-eight monthly instalments.
The same rules also address a recurring generator complaint: curtailment of renewable output. A must-run power plant, including most wind and solar generation, cannot be curtailed for commercial reasons, and a DISCOM that declines to draw power it is contractually bound to take must still compensate the generator at the applicable tariff. A Sovereign Dispute Arbitrator handling a claim against a state-owned DISCOM has to weigh this alongside the practical reality that many DISCOMs remain financially distressed instruments of state policy, which shapes both settlement dynamics and how quickly an award, once made, is actually paid.
Change in Law and Payment Security
A further category of dispute arises where a change in law, such as a new duty, cess or transmission charge, shifts the economics of a project after the tariff was fixed. PPAs typically entitle the generator to be restored to the same economic position, and disagreements over how that adjustment is calculated or whether a letter of credit or payment security mechanism has been properly drawn, frequently sit alongside the LPS claim. A banking and financial dispute arbitrator is often needed here, since the dispute turns as much on the mechanics of the security instrument as on the electricity contract itself.
Building a Claim That Survives the Jurisdiction Fight
Because the tariff or non-tariff question is decided first, and can be contested on appeal before the Appellate Tribunal for Electricity, a generator preparing a claim should document precisely how each disputed sum was calculated, whether it flows from the tariff order or a separate contractual mechanism, and keep the correspondence trail showing when payment fell due and why it was withheld. Claims that blur the two categories invite a jurisdictional battle that can consume as much time as the dispute itself.
Why Cross-Border Fluency Still Matters
Because Section 86(1)(f) lets the State Commission appoint the decision-maker itself, that appointee may sit either as a sole arbitrator or as a member of an arbitral tribunal alongside other nominees, depending on how the Commission structures the reference. Many DISCOM-related project financings and equipment contracts also sit alongside English-law facility agreements or are guaranteed by offshore lenders, so a tribunal member who can move between Indian regulatory procedure and international commercial practice is increasingly useful in these cases. An English arbitrator with a US background, combined with familiarity with Indian electricity regulation, is not a common combination, but it is precisely the kind of dual fluency these mixed regulatory-commercial disputes reward.
The Bottom Line
A DISCOM tariff dispute is rarely just a payment problem. It is usually a jurisdiction problem first, and a quantum problem second. Identifying which door the claim belongs behind, and building the record accordingly, determines whether a generator recovers what it is owed within a reasonable timeframe or spends years arguing over who gets to decide.
