Discoms get central relief; contributions can be paid in installments

HYDERABAD: The Union Department of Energy is working on a plan to ease the financial difficulties of electricity distribution companies (discoms), according to data available on the public domain.

The inability of discoms to pay their dues has impacted the entire power sector value chain. Late payments by a discom to a production company have a negative effect on the latter’s cash flow, which must make provisions for coal input subsidies and to maintain sufficient working capital for day-to-day operations. of the power station.

According to data available on the Praapti (Payment Ratification and Analysis in Power Procurement for Bringing Transparency in Invoicing of Generators) portal, as of May 28, the two TS Discoms – North and South – owed Rs 7,505 crore. Total unpaid dues were Rs 7,976 crore, including the current amount of Rs 471 crore.

The proposed scheme allows the payment of financial contributions in several easy installments. A one-time relief is being considered to be granted to all discoms in which the outstanding amount includes principal and late payment surcharge (LPSC) on the date of program notification will be frozen without further imposition of LPSC.

Discoms will have the option to pay the outstanding amount in up to 48 installments. Clearance of arrears on a deferred basis without imposition of LPSC will give Discoms time to bail out their finances. At the same time, the production company will benefit from assured monthly payments that otherwise would not have reached it.

However, in the event of late payment of a deposit by a Discom, the LPSC will be payable on the totality of the unpaid contribution otherwise exempt.

With the proposed scheme, Discoms will save money on LPSC over the next 12 to 48 months. States like Andhra Pradesh and Telangana will save around
Rs 1,100 crore to Rs 1,700 crore. The savings made by the Discoms will ultimately benefit the electricity consumer by reducing the load on the LPSCs in the retail tariff.

The measure should allow for a quick liquidation of arrears, which is much more important for production companies than the amount lost on the LPSC. At the same time, appropriate measures are put in place to ensure that the Discoms regularly pay their dues to the Gencos, failing which the supply of the Gencos will be reduced.

The LPSC is levied on a Discom’s unpaid payment to a production company at the base rate (indexed to the marginal cost of SBI’s lending rate). The LPSC is applicable for the period of default at the base rate for the first month of default and increases by 0.5% for each successive month of delay, subject to a maximum of 3% above the base rate at any time.