State-owned non-banking finance company REC Ltd has sanctioned Rs 220 billion to power distribution companies (discoms) to clear their outstanding dues. The financial assistance has been provided to discoms of Jharkhand, Rajasthan, Chhattisgarh and Jammu & Kashmir under the government's Late Payment Surcharge and Related Matters Rules 2022 (LPS rules).

The Ministry of Power had brought in the electricity LPS rules 2022 to address mounting dues of the state power utilities, which have now crossed Rs 1.50 trillion, REC, formerly Rural Electrification Corporation Ltd, said in a statement.

Major states such as Rajasthan, Jharkhand, Tamil Nadu, Maharashtra, J&K, Madhya Pradesh and Uttar Pradesh, with pending power purchase dues to the tune of almost Rs 960 billion, are complying with the rules. The distribution licensees of these states will be paying around Rs 26 billion to their electricity suppliers on August 5, 2022.

According to REC, the new rules will be applicable 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).

REC Ltd, under the Power Ministry, focuses on power sector financing and development across India. It provides financial assistance to state electricity boards, state governments, central/state power utilities, independent power producers, rural electric cooperatives and private sector utilities.

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