REC sanctions Rs 22,000 crore to discoms under new LPS mechanism

In case of delay in payment of an instalment, a late payment surcharge will be payable on the entire outstanding dues as on the date of notification of the rules.

REC sanctions Rs 22,000 crore to discoms under new LPS mechanism
The ministry of power had brought in the electricity LPS rules 2022 to address mounting dues of the state power utilities and advised REC and PFC to extend their support to discoms for timely payment of their dues under the new LPS rules.

In a step towards addressing the issue of mounting dues of state power utilities, which has now crossed Rs 1.5 trillion, REC, the state-run financial institution in the power sector, has sanctioned Rs 22,000 crore to power distribution companies (discoms) under the government’s Late Payment Surcharge (LPS) rules.

According to a statement issued by REC, formerly Rural Electrification Corporation, major states such as Rajasthan, Jharkhand, Tamil Nadu, Maharashtra, J&K, Madhya Pradesh and Uttar Pradesh, with pending power purchase dues to the tune of almost Rs 96,000 crore will be complying with the rules.

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“The distribution licensees of these states will be paying around Rs 2,600 crore to their electricity suppliers on August 5 and REC has provided a financial assistance of approximately Rs 22,000 crore on August 3 for clearing the outstanding dues by the distribution licensees of Jharkhand, Rajasthan, Chhattisgarh and Jammu & Kashmir,” the statement said.

The ministry of power had brought in the electricity LPS rules 2022 to address mounting dues of the state power utilities and advised REC and PFC to extend their support to discoms for timely payment of their dues under the new LPS rules.

Stating that timely payment of outstanding dues forms the core of the LPS rules, the REC said that this initiative works with the sole aim of financially strengthening the electricity suppliers and bringing financial discipline in the power sector.

“Furthermore, it will ensure that the end consumer not only gets reliable and quality uninterrupted supply of electricity, but additionally it alleviates the interest burden on account of late payment of power purchase dues by the state utilities,” the statement said.

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These rules will be applicable to outstanding dues of generating companies, inter-state transmission licensees and electricity trading licensees (suppliers).

As per the rules, the total outstanding dues including late payment surcharge by a distribution licensee may be cleared in a maximum of 48 equated monthly instalments (EMIs).

The distribution licensee has to specify, within thirty days of the promulgation of these rules, the amount of outstanding dues and number of instalments in which they would be paid to the electricity suppliers.

In case of delay in payment of an instalment, a late payment surcharge will be payable on the entire outstanding dues as on the date of notification of the rules.

There will be no additional LPS payable on the outstanding dues if timely payment is made.

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