September 28, 2021

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Legacy dues to private gencos hit `49,000 crore

discomsdiscomsThe issue was highlighted by the Association of Power Producers (APP) in its latest meeting with Union power minister RK Singh held earlier in the month.

Receivables of private power plants from state-run power distribution companies (discoms) as late payment surcharges (LPS) and unpaid payments in lieu of various pass-through costs approved by regulators under the ‘change-n-law’ (CIL) clause have piled up to become as large as the unpaid bills for power supplied.

According to the government’s ‘Praapti’ portal, overdues — pending receivables of 45 days or more — of `49,560 crore were owed by discoms to private power plants at the end of May 2021. However, over and above this, there was also LPS of `24,722 crore and CIL dues of `24,000 crore, which remained unpaid to independent power producers.

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The issue was highlighted by the Association of Power Producers (APP) in its latest meeting with Union power minister RK Singh held earlier in the month.

Irregular payments against LPS led to the accumulation of these dues to rise to `24,722 crore in May 2021 from `5,753 crore in August 2019. Similarly, CIL dues increased 41% to the current level in the same period.

APP suggested that the existing overdues to independent power producers (IPPs) be split into three categories, namely, current monthly outstanding, accumulated LPS and accumulated CIL with carrying cost. The last two categories, comprising the older dues, may be taken up for liquidation under equal monthly instalments within a specified timeline, APP proposed.

While total overdues of power plants from discoms increased only 2.5% at August end to `96,317 crore from the same period a year ago, the overdue to private power plants stood at `49,560 crore, rising by 32% in the same time span. The figures of the accumulated unpaid CIL-LPS dues at August end are not immediately available.

The rise in the total overdues would have been higher, had the liquidity infusion scheme announced by the Centre under the Atmanirbhar Bharat package not been implemented. Discoms can get up to `1.25-lakh-crore loans from PFC-REC to clear their dues through the package.

Providing certain relief to discoms, the Centre has recently reduced the rate of LPS from the earlier 18%, to a graded payment linked to the “bank rate” which is 500 basis points more than SBI’s marginal cost of funds-based lending. As FE reported earlier, the move is seen to potentially provide an annual relief of around `6,000 crore to discoms. Spiralling dues to electricity generators from discoms have been chronically ailing the power sector. The losses of discom stood at `61,360 core in FY19 and power minister Singh recently said the losses were down 38% on year at around `38,000 crore in FY20.

With revenue of discoms falling in FY21 due to disruptions amid the lockdowns to contain the coronavirus, losses discoms were projected to have surged to `90,000 crore. However, the power ministry has termed such estimates “grossly inflated”. Analysts at Crisil have pointed out that discom losses will be 40% higher in FY22 than in FY20.

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