PowerMin announces second special scheme in two years to clear discom dues

Total amouny owed to gencos at record Rs 1 trillion; scheme enables discoms to pay up in 48 instalments, freezes amount outstanding as on notification date

For the second time in two years, the union ministry of power has notified a scheme for the power distribution companies (discoms) to defer their dues towards the power generating companies (gencos). With the dues of the discoms touching a record high of Rs 1 trillion, the ministry has proposed a scheme to liquidate the discoms’ dues.

The proposed scheme would enable the discoms to pay their dues in 48 instalments, said the notification by the ministry. It has also proposed to provide one-time relaxation to all the discoms wherein the amount outstanding -including principal amount and late payment surcharge (LPSC) on the date of notification of the scheme will be frozen LPSC will not be imposed further.

LPSC is levied on the discoms when they do not pay their monthly dues in stipulated time of 90 days. The cumulative LPSC of all discoms stands at Rs 6,839 crore.

“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, gencos will benefit from assured monthly payments which otherwise were not forthcoming to them,” the ministry said in a public statement.

It however said that if the discoms delay the instalment payment, LPSC would be charged on the entire outstanding dues.
 

Under the new scheme, the power ministry claims, the discoms will save Rs 19,833 crore on LPSC in the next 12 to 48 months. “The 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 to the gencos. At the same time, it is being ensured that discoms pay their dues to gencos on a regular basis, otherwise supply by gencos will be reduced,” said the ministry in its notification.

Dues of state-owned discoms to gencos are on a rise at a time when the country battles a coal and power shortage crises, Business Standard recently reported. The lion’s share of dues is to privately owned or independent power producers (IPPs), while renewable power units continue to see an increase in dues.

The dues to central government gencos, which are primarily NTPC, NHPC, among others, have witnessed an increase of 25 per cent. According to the government data, Tamil Nadu is the biggest defaulter, with Rs 20,842 crore dues to gencos. It is followed by Maharashtra, with Rs 18,000 crore dues and Uttar Pradesh with Rs 9,000 crore.

This is despite an incentive scheme announced in 2020 to assist discoms to clear their dues. In June 2020, the dues of discoms touched a record high of Rs 1.3 trillion. The same month, Union Finance Minister Nirmala Sitharaman announced a special liquidity infusion scheme for the same. The Rs 90,000-crore loan scheme helped discoms clear their dues to gencos and transmission companies.

However, the scheme had limited impact. After reducing minimally in March 2021, the dues started rising again June onwards as demand for power increased during the last summer months. While the scheme ensured timely payment to the central government gencos, the IPPs continue to face delayed payments.