Tatsat Chronicle Magazine

REC Provides Financial Assistance to Discoms to Clear Their Dues

August 4, 2022

REC ltd has provided financial assistance of approximately Rs 22,000 crore for clearing the outstanding dues by the distribution licensees, which include states like Jharkhand, Rajasthan, Chhattisgarh and Jammu & Kashmir.

The initiative from REC came after the Ministry of Power issued Electricity, (Late Payment Surcharge and Related Matters) Rules, 2022 (LPS Rules 2022). The ministry came out with the rules as a step toward addressing the issue of mounting dues of the State power utilities which have now crossed Rs1,50,000 crore.

This initiative works with the sole aim of financially strengthening the electricity suppliers and bringing financial discipline in the power sector. Furthermore, it will ensure that the end consumer not only gets a reliable and quality uninterrupted supply of electricity, but additionally, it alleviates the interest burden on account of late payment of power purchase dues by the State utilities.

REC and PFC (State-run financial institutions in the power sector) were advised by the Ministry of Power to extend their support to Discoms for timely payment of their dues under the new LPS rules.

Major states such as Rajasthan, Jharkhand, Tamil Nadu, Maharashtra, J&K, Madhya Pradesh and Uttar Pradesh with pending power purchase dues to the tune of almost Rs 96,000 crore are complying with the rules.

In line with the same, the distribution licensees of the above states will be paying around Rs 2,600 crore to their electricity suppliers.
These rules will be applied to outstanding dues of generating companies, inter-state transmission licensees, and electricity trading licensees (suppliers).

As per the rules, the total outstanding dues including late payment surcharge by a distribution licensee may be cleared in a maximum of 48 Equated Monthly Instalments (EMIs). The distribution licensee shall specify within thirty days of the promulgation of these rules the amount of outstanding dues and the number of instalments in which they would be paid to the electricity suppliers.

In case of delay in payment of an instalment, a late payment surcharge will be payable on the entire outstanding dues as on the date of notification of the rules. There will be no additional LPS payable on the outstanding dues if timely payment is made. Thus, timely payment of outstanding dues forms the core of the LPS rules.

REC Limited is an NBFC focusing on Power Sector Financing and Development across India. Established in 1969, REC Limited has completed over fifty years in the area of its operations. It provides financial assistance to state electricity boards, state governments, central/state power utilities, independent power producers, rural electric cooperatives and private sector utilities.

Its business activities involve financing projects in the complete power sector value chain; for various types of projects including Generation, Transmission, Distribution and Renewable Energy.