Late Payment Surcharge for DISCOMs Reduced in Madhya Pradesh

The state’s power management company had recently said that the pandemic should be treated as force majeure

April 9, 2020


To tackle the unprecedented challenges posed by the outbreak of Coronavirus, the Madhya Pradesh Electricity Regulatory Commission (MPERC) has reduced the rate of current late payment surcharge (LPS) to be paid by the state’s distribution companies to power generators and inter-state transmission licensees by 0.50% per month.

Last week, Madhya Pradesh Power Management Company Limited (MPPMCL), had said that the spread of the Coronavirus and the subsequent nationwide lockdown is an unforeseen situation and should be treated as a force majeure event. The state’s power company noted that as a result of the outbreak of the pandemic, all DISCOMs operating in Madhya Pradesh had been forced to deal with the unprecedented reduction in the collection of revenues. The consumers are finding it difficult to pay bills at the counters due to the lockdown.

The Commission’s latest order states that if the payment gets delayed by 45 days from March 24, 2020, to June 30, 2020, relief can be claimed according to the power purchase agreements (PPAs) or transmission service agreements (TSAs).

For DISCOM payments to generating companies whose tariffs are determined by the Madhya Pradesh Commission, the rebates and late payment surcharges are as follows:

  • For the payment of bills by the generating company through a letter of credit or through National Electronic Fund Transfer (NEFT) or Real Time Gross Settlement (RTGS) within five days of the presentation of bills, a rebate of 1.5% will be allowed
  • If the payment of any bill is delayed beyond a period of 45 days, a late payment surcharge at the rate of 1.25% per month will be levied by the generating company

For DISCOM payments to transmission licensees, the Commission has provided rebates and late payment surcharges:

  • For payment of transmission charges through a letter of credit or NEFT or RTGS within two days of the presentation of the bill, a rebate of 2% will be allowed. If the payment is made by any other mode within one month, a rebate of 1% will be allowed
  • In case the payment of transmission charges is delayed beyond 45 days, the late payment surcharge at the rate of 1.25% per month for each day of delay will be levied

The Commission added that the Reserve Bank of India has permitted lending institutions and banks to grant a moratorium of three months on repayment for all term loans and has clarified that interest will continue to accrue on the outstanding portion of the term loans during the moratorium period. The generating companies and intrastate transmission licensees regulated by the state commission will be required to continue to discharge their debt service obligations and arrange for working capital for the day-to-day operation of their assets.

The Commission noted that in the given situation, the provisions of the 2020 Tariff Regulations for the interest on working capital should be adopted as the normative rate of late payment surcharge in place of the penal rate of surcharge.

Just a few days ago, given the ongoing lockdown in the country due to Coronavirus (COVID-19), the Central Electricity of Regulatory Commission (CERC) reduced the rate for late payment surcharge payable by distribution companies to power generators. The LPS is now reduced to 12% per annum from the earlier 18% if the due date falls between March 24, 2020, and June 30, 2020. According to the CERC, if there’s any delay in the payment to the generating companies (GENCOs) 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%.

Earlier, the Ministry had asked the Commission to specify a reduced rate of LPS, which is delayed beyond a period of 45 days from March 24, 2020, to June 30, 2020, to generating companies and licensees. The LPS will be applicable for delayed payments until June 30, 2020, and the surcharge should not be more than the cost the generating companies or transmission licensees would have to bear because of the delayed payment, the Ministry had proposed.

Meanwhile, the Ministry of Power recently issued a clarification regarding letters of credit to be given by DISCOMs. It stated that DISCOMs are expected to deposit LoCs for 50% of the cost of power they want to be scheduled, while the remaining 50% will have to be paid within 45 days of the presentation of the bill or as specified in the PPA. If the payment is not made as specified, the late payment surcharge will apply.

Currently, the whole world is in the grip of the debilitating Coronavirus, and its repercussions are being felt across industries. You can track all the latest developments and the impact of the COVID-19 pandemic on the renewable industry here.