After Finance Minister Nirmala Sitharaman announced that Rs 90,000 crore will be set aside for power distribution companies under the Aatmanirbhar Bharat package, Minister of State for Power RK Singh said this could help consumers save almost 25 per cent on their monthly electricity bills.
As per the new economic package announced on May 13, the Centre will help Discoms clear their outstanding dues to power generation companies (Gencos). Singh has stated that the Gencos will also be offering discounts to the Discoms to reduce their procurement costs, which will ultimately benefit the end customers, reported the Business Line.
Apart from helping households make direct savings of 20 to 25 percent in their monthly bills, the package will also benefit industrial consumers once Discoms pass on benefits of deferred fixed charges to them.
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Commenting on how the tariff reduction offered in the package will transpire, Singh explained that loans given to Discoms at low rates of interest will help them clear dues to Gencos for the power they have already procured. They were unable to clear the payments because their earnings had dropped after the novel coronavirus outbreak in India. There was hardly recovery of 15 percent as all industrial and commercial units were shut; receipts from the domestic sector was also down to just 10-15 percent.
The Centre had directed the Gencos to not cut power supplies even in the event of outstanding dues, which they followed at the cost of straining themselves. However, due to this package, the Discoms will now be able to pay them back, who in turn will be able to clear dues to the coal companies and the Railways.
Besides this, the Discoms had also been paying a fixed charge to the Gencos for “contracted quantity” under the Power Purchase Agreements, even if it is was not being drawn (due to fall in demand). This has created an unnecessary burden on Discoms as they were paying for power that was not even being used due to the lockdown. To ease their stress, the fixed charge has been deferred for the lockdown period, which will be exacted later in three equal instalments.
The benefits of the fixed charge deferment will pass on to the industrial sector eventually. As such, the cost of power procured from public sector undertakings will also go down by 20-25 percent during the lockdown, which can be passed on by Discoms to the end consumers.
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