The Ministry of Power has announced that it is working on a plan to support distribution companies (discoms) that are unable to pay their dues. Delays in payments by a discom to a power producing firm have a negative impact on a generating company’s cash flow, as it must make provisions for input supplies such as coal and maintain appropriate working capital for day-to-day power plant operations. According to the PRAAPTI portal, discoms owed Rs 1,000.18 billion and Rs 68.39 billion in late payment surcharge (LPSC) dues. This did not include any payments that were in dispute.
The proposed scheme allows discoms to satisfy their financial obligations in convenient instalments. All discoms are being considered for a one-time relaxation in which the amount outstanding (principal and LPSC) on the date of notification of the scheme will be frozen and no further LPSC will be imposed. The discoms will have the option of paying the outstanding balance in up to 48 instalments. discoms will have more time to shore up their finances if outstanding dues are liquidated in a deferred manner without the implementation of LPSC. At the same time, the generating company will profit from guaranteed monthly payments that would otherwise be unavailable. However, if a Discom fails to pay an instalment on time, the LPSC will be applied to all outstanding dues that were previously exempt.
As a result of the proposed scheme, the discoms will save an amount of Rs 198.33 billion on LPSC in the next 12 to 48 months. The states with substantial outstanding debts, such as Tamil Nadu and Maharashtra, will save approximately Rs 45 billion as a result of this policy. Uttar Pradesh will save approximately Rs 25 billion, while Andhra Pradesh, Jammu and Kashmir, Rajasthan, and Telangana will save between Rs 11 billion and Rs 17 billion.