TANGEDCO may save Rs 500 crore per month under new scheme to reduce interest burden

CHENNAI:  The State power utility, TANGEDCO (Tamil Nadu Generation and Distribution Corporation), may start saving Rs 500 crore every month on interest payments from July as it gets ready to adopt a new scheme announced by the Centre last week to reduce interest burden of power distribution companies (discoms) in the country. 

Under the scheme announced by the Union Power Ministry, discoms will be allowed to pay all their total dues in 48 instalments. The total outstanding loan principal and late payment surcharge (LPSC) will be frozen on the date of notification of the scheme and no surcharge will be levied after that. 

LPSC is charged on discoms that fail to pay their monthly dues within 90 days. The total LPSC of all discoms is Rs 6,839 crore.

According to a senior TANGEDCO official, the Tamil Nadu power utility's total outstanding liability is Rs 1,39,226 crore and interest outgo per year is Rs 7,000 crore. Central financial institutions charge an interest rate of 9.5 to 12.65 per cent on outstanding dues. 

To meet its power demand, TANGEDCO also purchases power from private power companies. Payment to such companies has to be made within 45 to 60 days, and 2 per cent interest has to be paid on outstanding dues after that period.

TANGEDCO purchases approximately Rs 47 crore worth of private power every year. Last year, the Centre had announced a Rs 3.03 lakh crore five-year, reform-linked scheme for State discoms. 

How it works?

Under the scheme, discoms will be allowed to pay all their total dues in 48 instalments. The total outstanding loan principal and late payment surcharge will be frozen on the date of notification of the scheme and no surcharge will be levied after that 

According to a senior official, the State power utility's total outstanding liability stands at Rs 1.4 lakh crore with an interest outgo of the discom per year is Rs 7,000 crore