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REC elevates the power sector yet again; sanctions ₹22,000 crores to help Discoms clear dues

By IndianMandarins- 04 Aug 2022
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Gurugram (04.08.2022): To strengthen the regulatory provisions for recovery of outstanding dues of generating companies the Ministry of Power, Government of India recently notified the Electricity, (Late Payment Surcharge and Related Matters) Rules, 2022 (LPS Rules 2022). 
This is the Centre's step towards addressing the issue of mounting dues of the state power utilities which have now crossed ₹1,50,000 crore.
It is worth mentioning here that last week, even Prime Minister Narendra Modi had drawn attention to ₹2.5 trillion worth of pending dues of gencos and Discoms. The PM had urged states to clear their dues to gencos while launching the ₹3 trillion Revamped Distribution Sector Scheme.
Much-needed financial boost
This initiative aims to financially strengthen the electricity suppliers and bring financial discipline to the power sector. Furthermore, it will ensure that the end consumer not only gets a reliable and quality uninterrupted power supply, but it alleviates the interest burden because of late payment of power purchase dues by the state utilities. 
The Ministry of Power had advised the REC and PFC (state-run financial institutions in the power sector) to extend their support to Discoms for timely payment of their dues under the new LPS rules.
REC provides ₹22,000-crore aid to clear dues  
Major states such as Rajasthan, Jharkhand, Tamil Nadu, Maharashtra, Jammu and Kashmir, Madhya Pradesh and Uttar Pradesh with pending power purchase dues to the tune of almost ₹96,000 crores are complying with the rules. 
In tune with the same, the distribution licensees of the above states will be paying around ₹2,600 crores to their electricity suppliers on August 5, 2022. 
REC has also provided financial assistance of approximately ₹22,000 crores on August 3, 2022, for clearing the outstanding dues by the distribution licensees of Jharkhand, Rajasthan, Chhattisgarh and Jammu & Kashmir.
What are the new rules?
These new rules will apply 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 a 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.

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