Centre Working On Scheme To Liquidate Past Dues Of Discoms

Union 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, an official release said on Wednesday (25 May).

"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, etc," the Power Ministry said in a release.

As per data available on PRAAPTI portal, as on 18 May, the discoms over dues (excluding disputed amounts and Late Payment Surcharge (LPSC)) were Rs 1,00,018 crore and the LPSC dues were Rs 6,839 crore, it added.

The proposed scheme enables 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 ministry said.

"The Discoms will be given flexibility to pay the outstanding amount in upto 48 instalments," it added.

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

"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 instalment by a discom, the Late Payment Surcharge shall be payable on the entire outstanding dues which otherwise was exempted," it said.

The ministry added that 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.

"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 in the range of Rs 1,100 crore to Rs 1,700 crore," the ministry said.

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, according to the ministry, 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 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 per cent for every successive month of delay, subject to a maximum of 3 per cent over base rate at any time.