Distribution companies (DISCOMs) owed power generators ₹329.72 billion (~$4 billion) in overdue payments for the monthly billing cycle at the end of January, according to Ministry of Power data.

The total outstanding owed to power generators is ₹562.41 billion (~$6.84 billion). This is 22% less than ₹719.58 billion (~$8.75 billion) DISCOMs owed power generators in December.

The current outstanding due, excluding the latest monthly dues, is ₹232.69 billion (~$2.83 billion).

The overdue before the trigger date is ₹224.76 billion (~$2.73 billion), after which the amount increases to ₹232.29 billion (~$2.82 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 in up to 48 installments.

In June this year, the MoP notified the LPS and Related Matters Rules, 2022, which substantially raised the DISCOMs’ cost for delaying payment to suppliers. The new rules provided for a LPS payable on the outstanding sum after the due date d at the base rate of LPS applicable for the first month of default.

The rules say that the rate of LPS for the successive months of default would increase by 0.5% for each month of delay, given that it will not be more than 3% higher than the base rate at any time.

In 2021, the Ministry of Power introduced a ₹3.03 trillion (~$36.87 billion) program aimed at enhancing the efficiency and financial stability of DISCOMs. The program provides financial support for the modernization and improvement of distribution infrastructure and is based on performance-linked reforms.

The weak financial condition of DISCOMs and their inability to make timely payments has hindered the growth of the renewable energy sector in the country.

Minister for Power R.K. Singh blamed state-owned DISCOMs for the poor implementation of the rooftop solar program and failure to achieve the target for 2022. The Ministry of New and Renewable Energy had highlighted the DISCOMs’ inability to effectively support and encourage rooftop installations in a letter sent to all the states.