The Department of Energy said in a statement on Wednesday that it was working on a plan to liquidate the arrears of Discoms as it owes Rs 1,00,018 crore on May 18, 2022 to production companies.
Discoms will be allowed to pay dues in 48 monthly installments which will save around Rs 19,833 crore on late payment surcharge while states like Maharashtra and Tamil Nadu will save around Rs 4,500 crore each and production companies will benefit from guaranteed monthly payments.
“The inability of Discoms to pay the contributions impacts the entire value chain of the electricity sector. Faced with this situation, the Ministry of Energy is working on a device to mitigate the financial difficulties of the Distribution Companies (Discoms) unable to pay their dues.” It said.
The ministry said the delay in payments by Discoms to a production company negatively affects the cash flow of a production company, which must make provisions for the supply of inputs such as coal, and to maintain a fund. sufficient working time for the day-to-day operation of the power plant.
According to the data available on the PRAAPTI portal, as of 18 May 2022, Discoms on dues (excluding disputed amounts and Late Payment Surcharge (LPSC)) was Rs 1,00,018 crore and LPSC dues were Rs 6,839 crore. The proposed scheme allows the payment of financial contributions in several instalments by the Discoms. A one-time relief is being considered to be granted to all Discoms in which the amount outstanding (including principal and LPSC) as of the date of program notification will be frozen without further imposition of LPSC.
Discoms will have the option to pay the outstanding amount in up to 48 installments.
Clearance of arrears on a deferred basis without imposition of LPSC will give Discoms time to bail out their finances. At the same time, the production company will benefit from assured monthly payments that otherwise would not have reached it. However, in the event of late payment of a deposit by a Discom, the Late Payment Surcharge will be due on the entire arrear which would otherwise have been exempt.
As a result of the proposed scheme, Discoms will save an amount of Rs 19,833 crore on LPSC over the next 12 to 48 months. States like Tamil Nadu and Maharashtra, which have large unpaid dues, will each save more than Rs 4,500 crore from the measure. Uttar Pradesh will save around Rs 2,500 crore while states like Andhra Pradesh, Jammu and Kashmir, Rajasthan and Telangana will save between Rs 1,100 crore and Rs 1,700 crore.
The savings made by Discoms will ultimately benefit the electricity consumer by reducing the LPSC charge in the retail tariff. The measure should allow for a quick clearance of arrears, which is far more important to production companies than the amount forfeited on the LPSC. At the same time, appropriate measures are put in place to ensure that the Discoms regularly pay their dues to the Gencos, failing which the supply of the Gencos will be reduced.
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