The union power ministry is working on a scheme to liquidate the dues of the distribution companies (Discoms) to power generating companies -- a move that is expected to benefit the entire value chain of the power sector and also result in relief to the end consumer.

The ministry data shows as on may 18, Discoms owed ₹1,00,018 crore to the Gencos, while the late payment surcharge (LPSC) stands at ₹6,839 crore.

The government now plans to offer a one-time relaxation under the scheme to all the Discoms under which the outstanding amount will be freezed and no further LPSC will be imposed.

“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,” says the power ministry.

In case of delay in the payment of instalment by a Discoms, the LPSC will become payable on the entire outstanding dues, which otherwise was exempted.

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

The saving by Discoms will ultimately benefit the electricity consumer by reducing the burden of LPSC in the retail tariff.

The ministry is of the view that the measure is expected to provide timely liquidation of arrears, which is 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,” it says.

“Delay of payments by a Discom to a generating company adversely affects the cash flow of a generating company, which needs to make provisions for input supplies as coal, and for keeping adequate working capital for day-to-day operation of the power plant,” adds the power ministry.

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