Discoms' Outstanding Dues To Generation Companies Nearly Halved In January

Debt halved government took steps like the implementation of late payment surcharges and the facility of EMI to utilities.

<div class="paragraphs"><p>Electricity towers. (Source: <a href="">Andrey Metelev</a>/Unsplash)</p></div>
Electricity towers. (Source: Andrey Metelev/Unsplash)

Total outstanding dues owed by electricity distribution companies to power producers almost halved to Rs 62,681.68 crore in January from Rs 1.21 lakh crore a year earlier.

Experts said this substantial reduction in the discoms' total outstanding is mainly due to steps taken by the government, like the implementation of late payment surcharge rules and providing the facility of equated monthly installments to utilities.

The total outstanding dues of discoms stood at Rs 62,681.68 crore in January 2023, which included Rs 25,526.42 crore overdue amount, that was not cleared even after 45 days of grace period offered by generators, according to the portal PRAAPTI.

In January 2022, the total outstanding dues of discoms stood at Rs 1.21 lakh crore, which included the total overdue amount of Rs 1.01 lakh crore.

Power producers give 45 days to discoms to pay bills for electricity supply. After that, outstanding dues become overdue and generators charge penal interest on that in most cases.

The PRAAPTI portal was launched in May 2018, to bring transparency to power-purchase transactions between generators and discoms. The portal has been revamped recently.

Earlier in November, 2022, the power ministry stated that with the implementation of the Electricity (LPS and Related Matters) Rules, 2022, remarkable improvement has been seen in recovery of outstanding dues of Suppliers including Generating Companies, Transmission Companies and Traders.

The total outstanding dues of States which were at Rs 1.37 lakh crore as on June 3, 2022, have been reduced by Rs 24,680 crore to Rs 1.13 lakh crore with timely payment of just four EMIs, it had stated.

For payment of EMI of Rs 24,680 crore, five states had taken a loan of Rs 16,812 crore from Power Finance Corporation Ltd. and REC Ltd and eight states had opted to make their own arrangement, it has stated.

Distribution companies are also paying their current dues in time to avoid regulations under the rule.

Distribution companies have paid almost Rs 1,68,000 crore of current dues in the last five months, it had said.

Based on the results achieved so far, it is expected that strict implementation of the LPS Rules will bring back financial viability of the power sector in the country and would attract investment to ensure reliable 24x7 electricity to consumers, it had stated.

'This Rule has not only ensured that the outstanding dues are liquidated but has also ensured that the current dues are paid in time. It may be seen that the Rule has played a vital role in ensuring the financial discipline in Discoms,' the ministry had said.

To give relief to power generation companies, the Centre enforced a payment security mechanism from Aug. 1, 2019. Under this mechanism, discoms are required to open letters of credit for getting power supply.