Power Ministry Scheme to liquidate DISCOM Dues

May 29, 2022

The Ministry of Power recently announced that it is working on a scheme to liquidate the dues of power distribution companies (discoms).

What are the key details of the scheme?

The proposed scheme aims to provide relief to the power sector ecosystem which is reeling under the pressure of non-payment of dues. It will provide liquidity to the power generating companies and the discoms can pay their dues in easy installments (up to 48 installments). One-time relaxation will be given to the power distribution companies by freezing their outstanding dues and the late payment surcharge (LPSC) will also be waived off. This will save Rs 19,833 crore on late payment surcharge over the next 12 to 48 months. States like Tamil Nadu and Maharashtra which have large outstanding dues will be benefitted the most from this scheme.

What are the issues faced by the power sector?

High technical and commercial losses
Low efficiency
Low and uncertain revenue recovery from consumers
Political pressure to provide free or cheap power to consumers

The biggest issue is that discoms accumulated over Rs 5 lakh crore losses. Also, discoms owe power generating companies (gencos) over Rs 1.1 lakh crore. This payment crisis hurts the entire value chain in the power sector and gives rise to a power crisis.

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