Discoms are given 60 days by power producers for payment of electricity supply bills. Post this period, the payment becomes overdue for which power generators charge penalty interest in most cases.
Ministry of Power on Saturday advised all power generation companies and transmission companies to charge late payment surcharge (LPS) at a rate not exceeding 12 per cent for payments under the Liquidity Infusion Scheme of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) under the Atmanirbhar Bharat campaign. The announcement was made to ease out the financial burden on discoms, according to the ministry. The LPS in many cases swing as high as 18 per cent to adversely impact discoms amid lockdown, the ministry added.
“In general, the applicable rate of Late Payment Surcharges is quite high despite the fact that interest rates in the country have softened over the last few years,” it said. The total outstanding dues owed by distribution firms was Rs 1.33 lakh crore in June 2020 – up by more than 47 per cent year-on-year from Rs 90,655 crore in June 2019, indicating stress in the sector, PTI reported. Distribution companies (discoms) owed a total of Rs 90,655 crore to power generation firms in June 2019, the agency said citing portal PRAAPTI. Discoms are given 60 days by power producers for payment of electricity supply bills. Post this period, the payment becomes overdue for which power generators charge penalty interest in most cases.
Ministry added that the government had announced steps to ease the impact on the liquidity position of the power sector particularly distribution companies such as rebate on capacity charges, relaxing provisions of the letter of credit for scheduling of power, liquidity infusion scheme, etc. The liquidity scheme worth Rs 90,000 crore was announced in May by Finance Minister Nirmala Sitharaman under which the government was looking to infuse the amount in discoms. However, earlier this month, independent power producers including Tata Power, Bajaj Energy, KSK, and Hindustan Power had rejected the Uttar Pradesh government’s proposal of settling state discoms’ dues to them contingent on the producers offering tariff rebates for past supplies, Financial Express had reported.