Ministry result

discoms: the Ministry of Energy is considering a new system for discoms to pay their dues; can save Rs 19,000 late payment surcharge

The Ministry of Energy said on Wednesday it was working on a scheme to allow electricity distribution utilities (discoms) to pay their dues mainly towards gencos, which could save Rs 19,833 crore in due to a late payment surcharge.

“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,” the department said in a statement.

Late payments from a discom to a production company (GENCO) negatively affect the cash flow of the production company, which must make provisions for the supply of inputs such as coal, and to maintain working capital sufficient for the daily operation of power plants. .

According to data available on the PRAAPTI portal, as of May 18, 2022, discom delays (excluding disputed amounts and Late Payment Surcharge (LPSC)) amounted to Rs 1,00,018 crore. LPSC dues were Rs 6,839 crore.

The proposed scheme would allow discotheques to pay financial contributions in several easy instalments.

A one-time relaxation is being considered to be granted to all discoms in which the amount outstanding (including principal and LPSC) on the date of notification of the scheme will be frozen without further imposition of LPSC.

Discoms will have the option to pay the outstanding amount in up to 48 installments.

Liquidating outstanding dues on a deferred basis without the imposition of LPSC will give discoms time to consolidate their finances.

At the same time, the production company will benefit from assured monthly payments that otherwise would not have reached it.

However, he specified that in the event of late payment of a deposit by a discotheque, the late payment will be due on the totality of the unpaid contribution which would otherwise have been exempt.

Through the proposed scheme, discoms will save an amount of Rs 19,833 crore on LPSC over the next 12 to 48 months, the ministry added.

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 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 weight of LPSC in the retail tariff, he said.

The measure is expected to provide quick liquidation of arrears, which is very important for gencos as the amount forfeited on the LPSC.

At the same time, appropriate measures have been put in place to ensure that nightclubs regularly pay their dues to the gencos, failing which the supply of the latter will be reduced.

The late payment surcharge is levied on the outstanding payment of a discom to a production company at the base rate (indexed on

‘s Marginal Cost of Lending Rate (MCLR)).

The LPSC is applicable for the period of default at the base rate for the first month of default and increased by 0.5% for each successive month of delay, subject to a maximum of 3% above the base rate at any time. PTI KKS KKS ABM ABM