NEW DELHI: In yet another test for power sector reforms, dues of discoms (distribution companies) to gencos (generation companies) rose by more than 23% to Rs 1,03,330 crore at the end March from Rs 83,709 crore in the year-ago period. The dues do not include amounts disputed by discoms, a fact that makes the situation more grim.
The outstanding amount is the highest since 2017, marking more than a fourfold increase from the over Rs 24,910 crore which discoms owed to gencos in March that year, according to data from power ministry’s Praapti (Payment Ratification And Analysis in Power Procurement for Bringing Transparency in Invoicing) portal that tracks billing and payments of gencos. The ballooning overdues underlines the challenges for the Centre’s reforms initiatives at the state level.
They also cast a shadow on the viability of gencos, which have to borrow to maintain operations since they have to pay upfront for fuel and transportation. The increased borrowings pushes many of them into a debt trap. The mounting dues also underline the poor financial condition of state, lack of accountability and political motivations of populism overwriting commitment to reforms.
To be fair, the Centre had given a breather on clearing gencos’ dues in view of the Covid-induced lockdown. Penalty for late payment was also waived. But what is surprising is that dues have been mounting even after the Centre implemented the payment security mechanism, which is akin to a prepaid card, from August 2019. Under this, discoms are required to open LCs (letters of credit) equivalent to the cost of power sought by states. In case the discoms fail to pay on time, gencos were to encash these LCs.
What makes it more difficult to explain the mounting dues is that in May 2020, the government had announced liquidity infusion of Rs 90,000 crore for discoms, under which these utilities were given loans at low interest by government-owned sectoral lenders PFC and REC. The package was later increased to Rs 1.35 lakh crore.
A key reason is lack of accountability among the state governments, who do not pay subsidy amounts to discoms, not at least on time.
The outstanding amount is the highest since 2017, marking more than a fourfold increase from the over Rs 24,910 crore which discoms owed to gencos in March that year, according to data from power ministry’s Praapti (Payment Ratification And Analysis in Power Procurement for Bringing Transparency in Invoicing) portal that tracks billing and payments of gencos. The ballooning overdues underlines the challenges for the Centre’s reforms initiatives at the state level.
They also cast a shadow on the viability of gencos, which have to borrow to maintain operations since they have to pay upfront for fuel and transportation. The increased borrowings pushes many of them into a debt trap. The mounting dues also underline the poor financial condition of state, lack of accountability and political motivations of populism overwriting commitment to reforms.
To be fair, the Centre had given a breather on clearing gencos’ dues in view of the Covid-induced lockdown. Penalty for late payment was also waived. But what is surprising is that dues have been mounting even after the Centre implemented the payment security mechanism, which is akin to a prepaid card, from August 2019. Under this, discoms are required to open LCs (letters of credit) equivalent to the cost of power sought by states. In case the discoms fail to pay on time, gencos were to encash these LCs.
What makes it more difficult to explain the mounting dues is that in May 2020, the government had announced liquidity infusion of Rs 90,000 crore for discoms, under which these utilities were given loans at low interest by government-owned sectoral lenders PFC and REC. The package was later increased to Rs 1.35 lakh crore.
A key reason is lack of accountability among the state governments, who do not pay subsidy amounts to discoms, not at least on time.
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