With LPS Rules, Significant Improvement in Payment of Outstanding Dues from DISCOMs to GENCOs

The outstanding dues of DISCOMs to GENCOs have been a matter of concern for quite some time now. As of June 2022, these dues stood at Rs 1.32 lakh- a 4 per cent YoY increase.

As of August 2022, a large number of state DISCOMs including Maharashtra, Tamil Nadu, Telangana, Andhra Pradesh, Uttar Pradesh, Jammu & Kashmir, Karnataka, Madhya Pradesh, Jharkhand and Rajasthan accounted for the largest share of outstanding dues to GENCOs.

Electricity (LPS and Related Matters) Rules, 2022, takes account of this and “provides for regulation of access to power in case of non-payment of dues, one month after the due date of payment or two and half months after the presentation of bill by the generating company”.

The implementation the Electricity (LPS and Related Matters) Rules, 2022, has reflected notable improvement as far as recovery of outstanding dues of suppliers, including GENCOS, transmission companies and traders is concerned.

As on June 3, when the total outstanding dues of States was pegged at Rs. 1,37,949 Cr, the amount has slid by Rs. 24,680 Cr. to Rs. 1,13,269 Cr. This can be attributed to the timely payment of just four EMIs alone. Towards the payment of EMI of Rs. 24,680 Cr, five States have taken loan worth Rs. 16,812 Cr. from Power Finance Corporation (PFC)  and REC. Meanwhile, eight States have chosen to make their own arrangement.

As per the mandate of the rules, DISCOMs are finally paying off their dues timely. In the last five months alone, DISCOMs have paid close to Rs. 1,68,000 Cr. of current dues.

Currently, just one distribution utility, namely, Jharkhand Bijli Vitran Nigam Limited (JBVNL) is under the ambit of regulation for non-payment of current dues. As of the trigger date, outstanding dues of DISCOMs have been fallen to Rs. 205 Cr. from Rs 5085 Cr. as of 18 August this year.

It is held that the execution of the rules so far has been beneficial in ensuring that DISCOMs pay at least some part of the dues. Further, firm implementation of the LPS Rules will help the return of financial viability of the power sector in India. In addition to this, it would ring in investment to ensure reliable 24×7 electricity to consumers. While on one hand, the rule has made sure that the outstanding dues are liquidated, on the other, it has provided for current dues to be paid in a timely manner.

In September 2022, Union Power Minister was hopeful that the outstanding dues of the DISCOMs to GENCOs will be eliminated by 2026. This statement comes from the fact that the EMIs have a maximum tenure of four years.

Earlier this year, POSOCO (Power System Operation Corporation Ltd) has directed the three power exchanges of IEX, PXIL, and HPX to curb electricity trading by 27 DISCOMs in 13 States as they failed to pay the late payment surcharge. Against this backdrop, Electricity (LPS and Related Matters) Rules, 2022 seems to be an important mandate with important directives for DISCOMs to follow.