The Union power ministry has mooted a new scheme that could help state government-owned discoms clear their pending dues.
It has been estimated that discoms collectively owed Rs.1,00,018 crore to power generation companies, as of May 18, 2022. Besides, dues arising from late payment charges amounted to Rs.6,839 crore.
Discoms will be given flexibility to pay the outstanding amount in up to 48 installments.
How it works
The proposed scheme allows for payment of financial dues by discoms in easy installments. A one-time relaxation could be given to discoms wherein the amount outstanding, which includes principal and late payment surcharge (LPSC), on the date of notification of scheme, will be frozen without any further imposition of LPSC.
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 a discom delays on the installment payment, LPSC will be imposed.
Discoms are expected to save around Rs.19,833 crore on LPSC in the next 12 to 48 months.
Saving on late payment charges
As a result of the proposed scheme, discoms are expected to save around Rs.19,833 crore on LPSC in the next 12 to 48 months. States like Tamil Nadu and Maharashtra that 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 & Kashmir, Rajasthan and Telangana will each save in the range of Rs.1,100 crore to Rs.1,700 crore.
Helping the end consumer
This potential 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 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 generation companies on a regular basis, otherwise supply by generation companies will be reduced.
Calculation of LPSC
Late Payment Surcharge (LPSC) is levied on the payment outstanding by a discom to a generating company at the base rate, which is 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 50 percentage points for every successive month of delay, subject to a maximum of 300 percentage points over base rate at any time.
