Chhattisgarh Cuts Late Payment Surcharge to 0.75% to Help DISCOMs

After CERC’s announcement, many states and union territories have announced a reduction in LPS so far


To deal with the ongoing COVID-19 pandemic, which has caused economic disruptions across the board, the Chhattisgarh Electricity Regulatory Commission (CSERC) has issued an order reducing the payment of the late payment surcharge (LPS) to 0.75% per month.

India is in a state of lockdown since March 24, 2020, until May 3, 2020. Given the current situation that is a matter of public interest, the Commission is providing some relief to electricity consumers and utilities in the state of Chhattisgarh.

Recently, given the ongoing lockdown, which is an attempt to limit the spread of the COVID-19 pandemic, the Central Electricity of Regulatory Commission (CERCreduced the rate for LPS payable by distribution companies (DISCOMs) to power generators. The CERC reduced the surcharge to 12% per annum from the earlier 18% if the due date falls between March 24, 2020, and June 30, 2020. The CERC stated that if there’s any delay in the payment to the generating companies and inter-state transmission licensees beyond 45 days from the date of presentation of the bills (between March 24, 2020, and June 30, 2020), then the DISCOMs can make the payment of LPS at a reduced rate of 1% per month instead of 1.5%.

After CERC’s announcement, a reduction in LPS was announced by several states like West Bengal, PunjabMadhya Pradesh, and union territories.

The Chhattisgarh Commission stated that in case of late payment by distribution licensees beyond 60 days from the date of the presentation of the bill falling between March 23, 2020, and June 30, 2020, distribution licensees would make the payment with LPS at the reduced rate of 0.75% per month.

Announced Reduction of Late Payment Surcharge (LPS) in States from March 24, 2020 to June 30, 2020

The Commission stated that it has taken into consideration the prevailing cost of the financial short capital requirement of Chhattisgarh State Power Generation Company Limited (CSPGCL) and Chhattisgarh Power State Transmission Company limited (CSPTCL), which comes to 0.75% per month. Therefore, the Commission decided to align the rate of late payment surcharge to the general cost of the short-term borrowings of generating companies and transmission licensees.

So, the Commission noted that in case of delayed payment by distribution licensees beyond 30 days falling between March 23, 2020, and June 30, 2020, distribution licensees would make the payment with LPS at the reduced rate of 0.025%, which works out to 0.75% per month. If the period of 30 days from the date of the presentation of the bills falls before March 24, 2020, or after June 30, 2020, the concerned utility will be liable to pay the LPS as per the CSERC Regulations 2015.

The Commission also observed that the Reserve Bank of India (RBI) has permitted lending institutions and banks to grant a moratorium of three months on repayment of loans. The bank has clarified that interest shall continue to accrue on the outstanding portion of the term-loans during the moratorium period.

The Commission further noted that the generating companies whose tariff has been determined by the Commission, the relief on LPS, which is delayed beyond March 24, 2020, to June 30, 2020, maybe claimed in terms of the force majeure provisions in the respective Power Purchase Agreements (PPAs).

The economic impact of the COVID-19 pandemic is being felt across the globe, and India’s financially inefficient distribution companies are also facing the consequences. You can find all the details of the impact of coronavirus on the renewable and power industries here.