Electricity distribution companies' outstanding dues towards gencos to be eliminated by 2026, says Power Minister

Outstanding dues of electricity distribution companies (discoms) towards gecos, which remains over Rs 1 lakh crore at any point of time, will be eliminated in the next four years, Union power minister R K Singh said.

The government has converted the total outstanding dues of discoms toward gencos (power generator companies) into Equated Monthly Installments (EMIs).

These EMIs have maximum tenure of four years and thus the total outstanding dues of discoms would be nil by 2026.

"The total outstanding dues of the discoms towards gencos is around Rs 1,13,000 crore. These dues would be totally cleared by 2026," Singh told PTI.

Singh explained that the government has put a very robust payment security mechanism for the power sector knowing about the perennial issue of bulging dues of discoms toward gencos.

He informed that the power ministry has put in place late payment fee Electricity, (Late Payment Surcharge and Related Matters) Rules, 2022 (LPS Rules 2022) which would trigger snapping of discoms' access to power exchanges for procuring supplies in case of non-payment of late payment surcharge.

Earlier in August this year, state-run Power System Operation Corporation Ltd (POSOCO) had asked three power exchanges -- IEX, PXIL and HPX -- to restrict electricity trading by 27 discoms in 13 states for non-payment of late payment surcharge.

The directive from POSOCO to Indian Energy Exchange (IEX), Power Exchange of India (PXIL) and Hindustan Power Exchange (HPX) was given to restrict trade of electricity by utilities of 13 states, including those in Maharashtra, Madhya Pradesh, Rasjasthan, Karnataka, Andhra Pradesh, Telangana, Tamil Nadu, Bihar, Chhattisgarh and Jharkhand.

The action was taken under the Electricity (Late Payment Surcharge and related matters), Rules 2022 notified by the power ministry in June, 2022.

Under the payment security mechanism, state utilities can be barred from trading on electricity exchanges for non-payment of dues and other charges to gencos. The POSOCO, a public sector enterprise under the Union power ministry, manages integrated operation of the Indian power system.

The minister explained that the discoms also buy power from exchanges to meet their demand in short term.

He further said that the ministry has also put in place mechanisms to restrict their access to long term electricity supplies under the power purchase agreements signed by them with gencos.

Discoms generally ink PPAs (Power Purchase Agreements) for supply of electricity by gencos for 25 years under long-term arrangements.

Singh said that now we have made it clear that if a discom does not pay then their access to long term power supply under PPAs would decrease by 10 per cent after every 30 days from the Inter State Transmission System (ISTS or national grid, supplied largely by central utilities and private sector).

Therefore, he exuded confidence that the perennial issue of bulging discoms' outstanding dues towards gencos would be eliminated in the next four years.