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Power ministry working on easy instalment scheme to mitigate discoms’ financial woes

As per the proposed scheme, a one-time relaxation is being considered for all discoms wherein the outstanding amount will be frozen and the savings by discoms will translate into reduced power tariffs for consumers.

The measure is expected to provide timely liquidation of arrears, which is more important to the power-generating companies than the amount foregone on the LPSC. (File)

Considering that the discoms’ inability to pay dues adversely affects the entire value chain of the sector, the Ministry of Power is working on a scheme to mitigate the financial woes of the power distribution companies.

States such as Maharashtra and Tamil Nadu will be able to save Rs 4500 crore each under the new scheme. The delay in payments by a discom affects a power-generating company as the latter needs to make provisions for input supplies such as coal and for keeping adequate working capital for the day-to-day operation of its power plant.

As per per data available on the ministry’s Payment Ratification and Analysis in Power Procurement for Bringing Transparency n Invoicing of Generators app, the discoms’ dues (excluding disputed amounts and the late-payment surcharge) were Rs 1,00,018 crore and the LPSC dues were Rs 6,839 crore on May 18.

The proposed scheme enables the payment of financial dues in easy instalments. A one-time relaxation is being considered for all discoms wherein the amount outstanding (includes the principal and the LPSC) on the date of the notification of the scheme will be frozen without further imposition of the LPSC. The discoms will be given flexibility to pay the outstanding amount in up to 48 instalments.

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The liquidation of outstanding dues in a deferred manner without the imposition of the 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 the event of a delay in the payment of an instalment by a discom, the LPSC shall be payable on the entire outstanding dues, which otherwise was exempted.

As a result of the proposed scheme, the discoms will save Rs 19,833 crore on the LPSC in the next 12-48 months. States such as Tamil Nadu and Maharashtra, which 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 Andhra Pradesh, Jammu and Kashmir, Rajasthan and Telangana will save in the Rs 1,100-1,700 crore range. The savings by discoms will ultimately benefit the electricity consumer by reducing the burden of the LPSC in the retail tariff.

The measure is expected to provide timely liquidation of arrears, which is more important to the power-generating companies than the amount foregone on the LPSC. At the same time, suitable measures are being put in place to ensure that discoms pay their dues on a regular basis, otherwise supply will be reduced.

The LPSC is levied at the base rate, pegged to SBI’s marginal cost of lending rate. The LPSC is applicable for the period of default at the base rate for the first month of the default and is increased by 0.5 per cent for every successive month of delay, subject to a maximum of three per cent over the base rate at any time.

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