Distribution companies (DISCOMs) owed power generators ₹799.77 billion (~$9.6 billion) in total dues for the monthly billing cycle in October 2023.

The current outstanding dues, excluding the latest monthly dues, are ₹232.62 billion (~$2.8 billion).

The overdue before the trigger date is ₹232.46 billion (~$3.3 billion), after which the amount will increase by ₹160.1 million (~$1.9 million) as the late payment surcharge (LPS) would become applicable.

The trigger date is one month after the due date of payment or two and a half months after the presentation of the bill by the generating company, whichever is later.

The DISCOMs are allowed to pay the outstanding amount in up to 48 installments.

The Ministry of Power recently proposed provisions in the Electricity (Amendment) Rules, 2023, for subsidy accounting and payment and a framework to ensure the financial sustainability of DISCOMs.

In June of the prior year, the ministry implemented the LPS and Related Matters Rules, 2022, which substantially increased the financial penalties for DISCOMs that delayed payments to suppliers. These rules stipulated that LPS would be applied to the outstanding sum after the due date, calculated at the base rate applicable for the initial month of default.

According to these rules, the LPS rate would progressively rise by 0.5% for each subsequent month of delay, with a maximum cap of 3% higher than the base rate at any given time.

Over the years, DISCOMs’ poor financial management has consistently hindered the growth of India’s energy sector. Despite numerous bailouts and reform initiatives spanning at least two decades, state-owned utilities remain a burden on the upstream segments of the electricity supply chain, including generation and transmission.

Notably, there has been a reduction in the aggregate technical and commercial losses of DISCOMs, decreasing to approximately 17% in the fiscal year 2021-22 from 22.32% in 2020-21, as reported by the Ministry of Power.