12 states, J&K debarred from power trading over pending liabilities
The Power System Operation Corporation (POSOCO) has penalized 12 states and a Union Territory (UT) by debarring them from trading electricity at the spot market for not clearing liabilities. Among them are power distribution companies (Discoms) in Andhra Pradesh, Tamil Nadu, Telangana, Karnataka, Bihar, Jharkhand, Madhya Pradesh, Maharashtra, Chhattisgarh, Jammu and Kashmir, Rajasthan, Manipur, and Mizoram, as per reports.
Why does this story matter?
The decision comes over a week after the Electricity (Amendment) Bill, 2022 was introduced in the Lok Sabha by the Centre. Data shows discoms in three states—Tamil Nadu, Maharashtra, and Telangana—owe almost 57% of total dues to these power-generating companies, followed by BJP-ruled Uttar Pradesh and Madhya Pradesh, along with Jammu and Kashmir, owing 26% of the dues.
Discoms owe Rs. 5,000 crore to power generating companies
According to reports, the grid operator used the Electricity Rules, 2022, to penalize discoms by preventing them from purchasing electricity from alternative short-term sources. They stated that if the default continues, long-term supply to the discoms can also be regulated. Notably, the defaulting discoms owe power generating companies (Gencos) a total of Rs. 5,000 crore, with Telangana owing the most at Rs. 1,380 crore.
What does the new rules say?
The rules announced in June bind companies to a Late Payment Surcharge (LPS) on any outstanding amount that is not paid within a month. For each month of delay, the LPS rate will rise by 0.5 percent. A delay in clearing the dues that exceed two and a half months will result in penalty provisions.
The dues rising even after two schemes to liquidate them
As per officials, despite two attempts to liquidate, state-owned discoms' debts to gencos are increasing. "The options are being reduced to push them (Discoms) towards payment discipline," said a senior official. Meanwhile, Power exchange prices are expected to decrease since there will be fewer buyers thanks to the regulation of power purchases from the spot market.
Companies can pay dues in 48 installments
As per Business Standard, liabilities of discoms surpassed Rs. 1.2 trillion by July 2022. In May, the power ministry announced a scheme allowing them to pay their bills in 48 installments. However, if an installment is not paid on time, a surcharge will be applied, the report said. Currently, POSOCO and the National Load Despatch Centre (NLDC) are empowered to penalize defaulting discoms.
