Reading Time: 2 minutes
Wednesday’s announcement by the Union Ministry of Power stated that it is developing a plan to alleviate the financial woes of Distribution Companies (Discoms), who are unable to pay their dues.
Discoms can pay their dues in 48 monthly installments under the scheme. As of 18th May 2022, Discoms owe Rs 1,00,018 crore to power-generating companies.
The Discoms will be able to pay financial dues in simple instalments under the proposed scheme. The Ministry of Power stated in a statement that a one-time relaxation was being considered for all Discoms. This means that the outstanding amount (includes principal, Late Payment Surcharge (LPSC)) at the date of notification of this scheme will be frozen without any further imposition of LPSC.
The Discoms can pay the remaining amount in 48 installments. Discoms will have time to stabilize their finances by having outstanding dues liquidated in a deferred fashion without the imposition of LPSC.
The generating company will also receive monthly guaranteed payments that they otherwise would not be able to access. The ministry stated that in the event of a delay in the payment of an Instalment, the Late Payment Surcharge will be charged on all outstanding dues.
A Discom’s delay in paying a generating firm can adversely impact the generating company’s cash flow. This company must make provisions for coal input and have sufficient working capital to support the day-to-day operations of the power plant.
According to data on PRAAPTI portal, the Discoms over Dues (excluding disputed amounts,LPSC), and as of 18th May 2022 were Rs. 1,00,018 Cr. The LPSC dues were at Rs 6,839 Crore.
The proposed scheme will allow the Discoms to save Rs 19,833 crore in LPSC over the next 12 to 48 month. This measure will help states like Maharashtra and Tamil Nadu, which have high outstanding dues, save more than Rs 4,500 crore.
Uttar Pradesh will save approximately Rs 2,500 crore, while other States such as Andhra Pradesh Jammu & Kashmir Rajasthan and Telangana will make savings in the range Rs 1,100 crore up to Rs 1,700 crore.