The Power Ministry on Wednesday said that it is working on a scheme to liquidate the past dues of the Distribution Companies (Discoms). The Discoms owe Rs. 1,00,018 crore to the Generating Companies as on May 18, 2022.

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According to the government, this scheme will allow the Discoms to pay dues in upto 48 number of monthly installments. A one-time relaxation is being given to all the Discoms wherein the amount outstanding (includes principal and LPSC) on the date of notification of the scheme will be frozen without the further imposition of LPSC (Late Payment Surcharge).

As a result of the proposed scheme, the Discoms will save an amount of Rs. 19,833 crore on LPSC in the next 12 to 48 months. States like Tamil Nadu and Maharashtra who have large outstanding dues will save over Rs 4,500 crore each as a result of this measure. Uttar Pradesh will save around Rs 2,500 crore while States like Andhra Pradesh, Jammu & Kashmir, Rajasthan and Telangana will save in the range of Rs 1,100 crore to Rs. 1,700 crore.

The 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 very much 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.

Late Payment Surcharge (LPSC) is levied on the payment outstanding by a Discom to a generating company at the base rate (pegged to SBI’s Marginal Cost of Lending Rate (MCLR)). LPSC is applicable for the period of default at base rate for the first month of default and increased by 0.5% for every successive month of delay, subject to a maximum of 3% over base rate at any time.