DISCOMs Get 3 Month Moratorium to Pay Power Generators Due to COVID-19 Disruption

The CPSU companies will supply electricity even to DISCOMs which have large outstanding dues


Amid the growing fear of the spread of Coronavirus and the lockdown imposed by the country to stop the spread of COVID-19, the workforce of the power sector, including the generation, transmission, distribution, and system operations, is working round-the-clock to maintain an uninterrupted supply of power in homes and establishments.

The Union Power Minister R.K. Singh said that the Ministry of Power is committed to providing round-the-clock electricity to all consumers.

Because of the lockdown, consumers are unable to pay the dues to distribution companies (DISCOMs), which has affected the liquidity position of the DISCOMs (DISCOM finances have been a mess even before this crisis). They are finding it hard to pay to the generating and transmission companies. Acknowledging the issue, the Union Power Minister announced some relief measures for the power sector.

In line with this, the Ministry announced that the central public sector undertaking (CPSU) generation and transmission companies would continue to supply electricity, even to DISCOMs, which have substantial outstanding dues to the generation companies. As per the announcement, in the current emergency, there will be no curtailment of supply to any DISCOM.

At the end of January 2020, DISCOMs owed renewable energy generators ₹62.19 billion (~$856.2 million) in overdue outstanding payments. Overall, as of January 2020, DISCOMs owed power generators ₹870.25 billion (~$11.98 billion).

The Ministry has also directed the Central Electricity Regulatory Commission (CERC) to provide a moratorium of three months to DISCOMs to make payments to the generating companies and transmission licensees and not levy any penalties for late payments. The Ministry has also requested the state governments to issue similar directions to state electricity regulatory commissions (SERCs).

This announcement will hit the solar, wind, and other clean energy companies hard. Many DISCOMs are known to curtail solar and wind power and delay payments sometimes for over six months, even when things were good. The government, instead of ensuring payments, has instead punished them by bailing DISCOMs out at the expense of generators. This will lead to cash flow issues for generators, which will trickle down.

Voicing concern over the three-month moratorium, one of the developers told Mercom, “This direction by the Ministry to issue three-moratorium to DISCOMs across the board has created havoc among the project developers. The risk is squarely passed on to the developers which is totally unfair. Because of this, the credit ratings of the developers are hit. Rating agencies are already seeing trouble for generators. Also, on the other side, the RBI has issued a directive that all banks can allow a moratorium of three months on payment of the installments for all term loans. But this will depend on the discretion of the banks as this is only a directive and not a rule. Even if the moratorium is allowed, the interest will have to be paid. The interest is not waived off.”

Besides this, the Ministry of Power has also issued a directive which states that power will be scheduled even if the payment security mechanism (PSM) is reduced by 50% against the initial contract. The order will be valid until June 30, 2020. Earlier, the Ministry had also directed that entities which fail to maintain adequate security mechanism as per contract will not be allowed to procure power from the power exchange and will not be granted short-term open access.

Recently, to provide operation and maintenance of the interstate transmission network during the ongoing COVID-19 nationwide lockdown, the Ministry of Power requested the administrations of all states and union territories to allow staff and vendors of power generation and transmission units to perform their duties.

Earlier, the MNRE issued an official memorandum stating that time extensions in scheduled commissioning of renewable projects due to the disruption of supply chains will be treated as a ‘force majeure’ event.

Coronavirus pandemic is proving to be the solar industry’s biggest challenge this year, and the repercussions are being felt across industries all over the globe. Track the latest developments and initiatives taken by the government to fight the economic repercussions of the pandemic in the renewable industry here.