Power Ministry Considering New Scheme For Discoms To Pay Off Dues, Save Late Fees

The power ministry on Wednesday said it is working on a scheme for electricity distribution utilities to pay off their dues mainly towards generation companies, which has the potential to save Rs 19,833 crore on account of late payment surcharge.

"The inability of discoms to pay dues impacts the entire value chain of the power sector. Considering this situation, the Ministry of Power is working on a scheme to mitigate the financial woes of the Distribution Companies that are unable to pay their dues," the ministry said in a statement.

Delay of payments by a discom to a generating company adversely affects the cash flow of the generating firm, which needs to make provisions for input supplies like coal, and for keeping adequate working capital for day-to-day operation of power plants.

As per data available on the PRAAPTI portal, as on May 18, 2022, the discoms' overdues (excluding disputed amounts and Late Payment Surcharge) stood at Rs 1,00,018 crore. The LPSC dues were Rs 6,839 crore.

The proposed scheme would enable payment of financial dues in easy instalments by the discoms.

A one-time relaxation is being considered to be given to all the discoms wherein the amount outstanding (includes principal and LPSC) on the date of notification of the scheme will be frozen without further imposition of LPSC.

The discoms will be given flexibility to pay the outstanding amount in up to 48 instalments.

The liquidation of outstanding dues in deferred manner without imposition of LPSC will give discoms time to shore up their finances.

At the same time, the generating company will benefit from assured monthly payments which otherwise were not forthcoming to them.

However, it stated that in case of delay in payment of an instalment by a discom, the late payment surcharge shall be payable on the entire outstanding dues which otherwise was exempted.

As a result of the proposed scheme, the discoms will save an amount of Rs 19,833 crore on LPSC in the next 12 to 48 months, the ministry added.

States like Tamil Nadu and Maharashtra, which have large outstanding dues, will save over Rs 4,500 crore each as a result of this measure.

Uttar Pradesh will save around Rs 2,500 crore, while Andhra Pradesh, Jammu and Kashmir, Rajasthan and Telangana will save in the range of Rs 1,100 crore to Rs 1,700 crore.

The savings by discoms will ultimately benefit the electricity consumer by reducing the burden of LPSC in the retail tariff, it said.

The measure is expected to provide timely liquidation of arrears which is very much important to the gencos than the amount foregone on LPSC.

At the same time, suitable measures are being put in place to ensure that discoms pay their dues to gencos on a regular basis, otherwise supply by the latter will be reduced.

Late payment surcharge is levied on the payment outstanding by a discom to a generating company at the base rate (pegged to SBI's marginal cost of lending rate).

The LPSC is applicable for the period of default at base rate for the first month of default and increased by 0.5 per cent for every successive month of delay, subject to a maximum of 3 per cent over base rate at any time.