MoP plans a scheme for discoms to pay off their dues to power gencos
To help discoms clear their dues, the power ministry (MoP) is considering a new scheme that may help save them Rs 19,000 crore in late payment surcharges.
The power ministry announced on Wednesday that it is working on a scheme for electricity distribution utilities to pay off their dues to pending to power generating companies. According to ministry the scheme could help save discoms Rs 19,833 crore in late payment surcharges to generators..
When a power distributor delays the payment due to power generation company, it can negatively impact the cash flow of the generating company and its ability to meet day to day operating expenses such as coal purchases and other capital expenditures.
As of May 18, 2022, the discoms’ overdues (excluding disputed amounts and Late Payment Surcharge (LPSC)) stood at Rs 1,00,018 crore, as per data available on the PRAAPTI portal. The LPSC dues were Rs 6,839 crore.
The proposed scheme would enable the discoms to pay their dues in easy installments with a flexibility of up to 48 installments.
The Ministry is considering a one-time relief to power distributors in which all outstanding amounts (principal and LPSC) will be frozen without imposition of further LPSC as on the date of notification of the scheme.
A deferred payment structure for outstanding dues will give power distribution companies more time to shore up their finances. While on the other hand, the generating company will benefit from assured monthly payments that would not have been forthcoming without such a restructuring.
The proposed scheme also states that in case of delay in payment of an instalment by a discom, the late payment surcharge shall be payable on the entire outstanding dues.
The ministry said that the proposed scheme would save the discoms Rs 19,833 crore on LPSC in the next 12 to 48 months. Tamil Nadu and Maharashtra—two states with large outstanding dues—will save over Rs 4,500 crore each.
On the other hand, Uttar Pradesh will save about Rs 2,500 crore a year, while Andhra Pradesh, Jammu and Kashmir, Rajasthan, and Telangana will each save between Rs 1,100 crore and Rs 1,700 crore per year.
The savings made by discoms will ultimately benefit electricity consumers in the form of lower retail tariffs, it said. The measure is expected to provide timely liquidation of arrears, which is important for generating companies more than the amount that they forego on LPSC payments.
Along with this certain measures are also being taken to ensure that discoms pay their dues to gencos on a regular basis; otherwise, supply will be reduced.
Discoms pay late payment surcharge to generating companies at the base rate (pegged to SBI’s Marginal Cost of Lending Rate (MCLR)).
The LPSC is applicable for the first month of default at base rate; thereafter, the penalty is increased by 0.5% per month, with a ceiling of 3% over base rate at any time.
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