The Ministry of Power (MoP) announced that it is working on a program to mitigate the financial woes of the Distribution Companies (DISCOMs) by liquidating their dues.

The delay in payments by DISCOMs to generating companies adversely impacts the companies’ cash flow. The generators need to make provisions for the input of supplies like coal and other raw materials to operate their power plants without interruptions.

As per data available on the PRAAPTI portal, as of May 18, 2022, the DISCOMs owed power generators ₹1.18 trillion (~$15.20 billion) in overdue payments and ₹68.39 billion (~$881.13 million) in late payment surcharge dues.

The proposed program enables payment of these financial dues in easy installments by the DISCOMs. They will be offered a one-time relaxation wherein the outstanding amount, including the principal and the late payment surcharge, will be frozen on the date of the notification without the further imposition of late payment surcharges.

The DISCOMs will be provided the flexibility to pay the outstanding amount in up to 48 installments. The liquidation of outstanding dues in a deferred manner without imposing a late payment surcharge is expected to give DISCOMs time to shore up their finances.

The generating companies would benefit from assured monthly payments that were not forthcoming.

In case of delay in payment of an installment by the DISCOM, the late payment surcharge will be payable on the entire outstanding dues.

As a result of the proposed program, the DISCOMs are expected to save an amount of ₹198.33 billion (~$2.56 billion) on the late payment surcharges in the next 12 to 48 months.

States like Tamil Nadu and Maharashtra, with large outstanding dues, will save over ₹45 billion (~$579.70 million) each. Uttar Pradesh would save around ₹25 billion (~$322.06 million), while Andhra Pradesh, Jammu & Kashmir, Rajasthan, and Telangana will save between ₹11 billion (~$141.71 million) and ₹17 billion (~$219.01 million).

The saving by DISCOMs will benefit the electricity consumer with a reduced burden of late payment surcharges in the retail tariff. The measure is expected to provide timely liquidation of the amount outstanding, which is critical to the generating companies more than the amount foregone on these surcharges.

The ministry said that suitable measures would be put in place to ensure that DISCOMs pay their dues to generating companies regularly, failing which the supply to the DISCOMs would be reduced.

Early this year, Union Power Minister R.K Singh outlined the various steps taken by the government to help improve the financial health of the distribution companies (DISCOMs) in the country.