Government focuses on financial viability for India’s sustainable power sector

In order to increase basic payment discipline in the power sector value chain, whose sustenance has been a matter of concern due to increasing receivables to GENCOs, the Government of India promulgated the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, on June 3, 2022. This was done in recognition of the cash flow issues resulting from the outstanding receivables of generating companies from DISCOMs. These regulations impose duties on the DISOCMs to pay up their legacy debts as of June 3, 2022, in a time-bound, phased manner, in equal monthly amounts, with the benefit that the late payment surcharge will no longer be applicable after June 3, 2022.

These rules also establish a structure for the timely payment of past-due debts through the creation of a Payment Security Mechanism, offer power restrictions in the event that the rules’ requirements are not met, and serve as an incentive to gradually withdraw open access. DISCOMs can obtain loans from PFC Ltd. and REC Ltd. to pay off their debts to generating companies. Remarkable progress has been made in the recovery of unpaid debts since the Electricity (LPS and Related Matters) Rules, 2022, went into effect. 13 States and UTs have paid a timely instalment of ₹ 47,317 Crores towards legacy debt that, as of June 3, 2022, was worth ₹ 1,38,378 Crores. (8 EMIs). In addition, 20 states and UTs claimed that as of June 3,202, there were no unpaid debts.

A financially stable, viable, and sustainable electricity industry is one of the goals of the government of India, which has been executing a number of performance-linked and result-oriented programmes. (Distribution segment in particular).

Modified Distribution Sector Scheme (RDSS), Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, Additional Borrowing Space of 0.5 percent of GSDP to the States linked to power sector reforms, Corporate Governance Guidelines, and Additional Prudential Norms for Lending by Power Finance Corporation (PFC) Limited and Rural Electrification Corporation (REC) Limited, based on the performance of the utilitarian These programmes have been created to address operational and financial problems in order to impose the appropriate financial discipline on DISCOMs and state governments.

In addition to the aforementioned measures, pre-paid smart metres are to be put in mission mode under RDSS in order to achieve the primary goal of loss reduction in distribution and to profit from economies of scale. Pre-paid smart metres, including system metres, are crucial interventions in lowering distribution losses in the utilities and enabling automated measurement of energy flows, energy accounting, and auditing without any human involvement. System metering at the feeder and distribution transformer levels with a communicating feature would also be implemented in addition to the installation of pre-paid smart metres and the associated Advanced Metering Infrastructure (AMI) to enable proper energy accounting every month and for the detection of high loss areas.