Corona's impact on electricity companies' bill collection

Mumbai, Ta. Monday, June 29, 2020

The arrears of power generators from state power distribution companies (DISCOMs) rose by 5 per cent year-on-year to Rs 1.3 trillion in April this year, indicating increased tensions in the power sector. Seeing the huge amount of arrears to be paid, there are indications that the financial stress of the power producers will increase in the coming days.

In April 2016, power companies were owed Rs 4 crore by Discoms, sources in the power ministry said.

Despite a 90-day grace period, in April 2020, DISCOMs had to pay Rs 1,06.5 crore to power producers. Which had an arrears of Rs 500 crore in April last year.

Power generating companies give Discoms 90 days to pay. Even after this time if the discoms fail to pay the amount it is called overdue amount and the manufacturers may charge interest on it.

The Center has been implementing payment security mechanism since August last year to ensure security of power supply money to power generating companies. Under this system, the discoms have to get letters of credit to get electricity.

Due to the impact of Kovid-18, the central government has provided a moratorium to Discom to pay the bill. Not only this, penalty on late payment has also been waived.

The government has launched a Rs 50,000 crore liquidity infusion scheme for DISCOMs, under which DISCOMS will be able to hire Power Finance Corporation and REC Ltd. Cheap interest rate loans have been made available from. In doing so, the government has tried to provide support to power generating companies.

The states that owe money to the power companies include Rajasthan, Uttar Pradesh, Telangana, Andhra Pradesh, Karnataka and Tamil Nadu. Given the outstanding amount to be paid by DISCOMS, the possibility of increasing financial pressure on power generating companies in the coming days is not ruled out, an analyst said.