As a result of the proposed scheme, the Discoms will save money on LPSC in the next 12 to 48 months. States like Andhra Pradesh and Telangana will save in the range of Rs 1,100 crore to Rs 1,700 crore. Representational image/AFP
HYDERABAD: The Union ministry of power is working on a scheme to mitigate the financial woes of power distribution companies (discoms), according to data available on public domain.
The inability of discoms to pay their dues has impacted the entire value chain of the power sector. Delay of payments by a discom to a generating company adversely affects the cash flow of the latter, which needs to make provisions for input subsidies for coal and for keeping adequate working capital for day-to-day operations of the power plant.
As per data available on the Praapti (Payment Ratification and Analysis in Power Procurement for Bringing Transparency in Invoicing of Generators) portal, as on May 28, the two TS Discoms —northern and southern — were due Rs 7,505 crore. The total outstanding dues were Rs 7,976 crore including the current due of Rs 471 crore.
The proposed scheme enables payment of financial dues in easy instalments. A one-time relaxation is being considered to be given to all discoms wherein the amount outstanding includes principal and late payment surcharge (LPSC) on the date of notification of the scheme will be frozen without further imposition of LPSC.
The discoms will be given flexibility to pay the outstanding amount in up to 48 instalments. 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 of delay in payment of an instalment by a Discom, the LPSC shall be payable on the entire outstanding dues which otherwise was exempted.
As a result of the proposed scheme, the Discoms will save money on LPSC in the next 12 to 48 months. States like Andhra Pradesh and Telangana will save in the range of
Rs 1,100 crore to Rs 1,700 crore. Saving 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 much more 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 Gencos on a regular basis, otherwise supply by Gencos will be reduced.
LPSC is levied on the outstanding payment by a Discom to a generating company at the base rate (pegged to SBI’s marginal cost of lending rate). LPSC is applicable for the period of default at base rate for the first month of default and increases by 0.5 per cent for every successive month of delay, subject to a maximum of 3 per cent over base rate at any time.