Friday, June 24, 2022

Govt working on new scheme to allow power discoms to clear dues in installments

The Ministry of Power has said that it is working on a scheme for power distribution companies to enable discoms in clearing their huge outstanding dues

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  • The scheme is likely to help discoms save Rs 19,833 crore on LPC, the Ministry of Power has said
  • The proposed scheme enables payment of financial dues in easy instalments by discoms

New Delhi: The Ministry of Power said on Wednesday that it is working on a scheme for power distribution companies under which it is considering freezing Late Payment Surcharge (LPSC) on discom dues at a specific date in order to enable discoms in clearing their huge outstanding dues. The scheme is likely to help discoms save Rs 19,833 crore on LPC, the Ministry of Power has said. “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,” said the ministry.

“Delay of payments by a discom to a generating company (genco) 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,” it added. The news comes in the midst of a power crisis caused due to an unprecedented surge in power demand coupled with a shortage of coal. Coal supplies to some thermal power plants have been curtailed by state-run miner Coal India Ltd (CIL) due to large outstanding dues.

Discoms will be required to clear dues in 48 installments

The proposed scheme enables payment of financial dues in easy instalments by discoms. A one-time relaxation is being considered to be given to all 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, said the Ministry of Power. Discoms will be given flexibility to pay the outstanding amount in up to 48 installments.

“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, in case of delay in payment of an installment by a discom, the Late Payment Surcharge shall be payable on the entire outstanding dues which otherwise was exempted,” said the government.

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

Discom dues: Scheme to benefit states with large outstanding dues

As a result of the proposed scheme, discoms will save an amount of Rs 19,833 crore on LPSC in the next 12 to 48 months. States like Tamil Nadu and Maharashtra who 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 states like Andhra Pradesh, Jammu & Kashmir, Rajasthan and Telangana will save between Rs 1,100 to Rs 1,700 crore. “The saving by discoms will ultimately benefit the electricity consumer by reducing the burden of LPSC in the retail tariff. 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,” said the ministry.

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

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