Govt to allow Discoms to settle dues in 48 monthly instalments

Our Bureau | | Updated on: May 25, 2022

The scheme will allow Discoms to save ₹19,833 crore on Late Payment Surcharge in the next 12 to 48 months

The government is working on a scheme to liquidate the past dues of Discoms, which, as on May 18, stand at ₹1,00,018 crore. Under the scheme, the Discoms will be allowed to pay dues in up to 48 monthly instalments, the Power Ministry said on Wednesday.

The inability of Discoms to pay dues impacts the entire value chain of the power sector. The scheme will help Discoms save ₹19,833 crore, it said in a statement.

“Delay of payments by a Discom to a generating company (Genco) affects the cash flow of a generating company, which needs to make provisions for input supplies such as coal, and for keeping adequate working capital for day-to-day operation of the power plant, etc.

Per data available on PRAAPTI portal, as on May 18, 2022, the Discoms overdues (excluding disputed amounts and Late Payment Surcharge (LPSC)) stood at ₹1,00,018 crore and LPSC dues at ₹6,839 crore.

Discoms to gain

The proposed scheme enables payment of financial dues in easy installments by the Discoms. A one-time relaxation is being considered 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 Genco 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.

“As a result of the proposed scheme, the Discoms will save an amount of ₹19,833 crore on LPSC in the next 12 to 48 months. States such as Tamil Nadu and Maharashtra which have large arrears will save over ₹4,500 crore each as a result of this measure. Uttar Pradesh will save around ₹2,500 crore, while States such as Andhra Pradesh, Jammu and Kashmir, Rajasthan and Telangana will save in the range of ₹1,100-1,700 crore,” the Power Ministry noted.

The savings 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 more 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 Gencos will be reduced, it added.

Late Payment Surcharge

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 increases by 0.5 per cent for every successive month of delay, subject to a maximum of three per cent over base rate at any time.

Published on May 25, 2022
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