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Business News/ Industry / Energy/  Scheme to help discoms pay their dues

Scheme to help discoms pay their dues

The generating firms will benefit from monthly payments, which otherwise were not forthcoming to them

The discoms can repay the dues in up to 48 instalments.  (HT_PRINT)Premium
The discoms can repay the dues in up to 48 instalments.  (HT_PRINT)

NEW DELHI : The union ministry of power is working on a scheme to liquidate the dues of power distribution companies under which discoms would be able to pay financial dues in easy instalments devoid of further late payment surcharge (LPSC).

A statement from the ministry said that a one-time relaxation is being considered to be given to all the discoms wherein the amount outstanding, including 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, the ministry said adding that the generating companies will also benefit from assured monthly payments which otherwise were not forthcoming to them. 

“However, 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," it said.

The development comes at a time when the power sector is going through a coal crisis and the supply chain has been impacted with gencos unable to purchase coal due to piling debt with discoms. Delay of payments by a discom to a generating company adversely affects the cash flow of a generating company, which needs to make provisions for input supplies as coal, and for keeping adequate working capital for day-to-day operation of the power plant. 

As on 18 May 2022, the discoms overdues, excluding disputed amounts and LPSC stood at 1,00,018 crore and the LPSC dues were 6,839 crore.

The ministry noted that 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 (discoms) that are unable to pay their dues," it said.

As a result of the proposed scheme, the ministry said that the discoms will save an amount of 19,833 crore on LPSC in the next 12 to 48 months. Tamil Nadu and Maharashtra who have large outstanding dues will save over 4,500 crore each as a result of this measure. 

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

The saving by discoms will ultimately benefit the electricity consumer by reducing the burden of LPSC in the retail tariff, according to the government. 

“The measure is expected to provide timely liquidation of arrears which is very much important to the generating companies 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 Gencos will be reduced," it said.

Late Payment Surcharge (LPSC) is levied on the payment outstanding by a discom to a generating company at the base rate, pegged to State Bank of India’s marginal cost of lending rate (MCLR). LPSC is applicable for the period of default at base rate for the first month of default and increased by 0.5% for every successive month of delay, subject to a maximum of 3% over base rate at any time.

The non-payment of dues by discoms to gencos is among key factors for the recent coal and power shortage scenario. As on 24 May, the total coal stock at 173 power plants tracked by the Central Electricity Authority stood at 21.82 million tonne, 32% of the required 66.49 million tonne. 

Among them 80 plants based on domestic coal and 10 imported coal based plants are running with critical level of coal stock, which is less 25% of the required inventory.-

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Published: 25 May 2022, 07:26 PM IST
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