Madhya Pradesh Asks Ministry of Power Not to Take Action for Payment Delays

MPPMCL has stated that it is constrained to invoke the clause of force majeure in the PPA


The Coronavirus outbreak has created an unprecedented situation with the country in a state of complete lockdown declared by the National Disaster Management Authority (NDMA) from March 24, 2020, to April 14, 2020.

The Madhya Pradesh Power Management Company Limited (MPPMCL), in its letter, has 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 challenge of a drastic reduction in the collection of revenues. The consumers are finding it difficult to pay bills at the counters due to the lockdown.

Further, the demand for power throughout the state has also come down because of the closure of industries, shops, and other establishments, which has forced DISCOMs to schedule or partly schedule power from some of the conventional source generators. Power from renewable energy sources under the must-run status is being scheduled, it added.

MPPMCL, in its letter, noted that massive disruption in the economic activity is likely to disrupt consumers’ capacity to pay electric bills on time. The DISCOMs and MPPMCL being at the forefront of the consumer touchpoint are going to face the repercussions of the cash crunch being faced by the public.

As per the letter, the Energy department, government of Madhya Pradesh, has requested the Ministry of Power to advise Coal India Limited, NTPC, and Railways not to take adverse action on MPPMCL and the Madhya Pradesh Power Generating Company Limited (MPPGCL) for the delay in payments and maintain the supply of power and coal to MPPMCL and MPPGCL along with the waiver of delayed payment surcharge.

In the letter, the company states that it is constrained to invoke the provisions of the force majeure clause under the power purchase agreement, and the current events on nationwide lockdown may be termed as the force majeure events affecting the obligations of MPPMCL under the PPA. Further, due to the fall in the collection of revenues, even the payment of the power purchase bills of the scheduled capacity may also be delayed.

The letter also points to the fact that due to the unknown and unpredictable nature of COVID-19, it is difficult to forecast that for how long this force majeure situation will continue.

A few days back, amid the chaos created by Coronavirus, Anand Kumar, Secretary of MNRE, stated that all renewable energy projects currently under implementation would be given an extension of time in light of the ongoing lockdown due to the COVID-19 pandemic.

Recently, the Ministry of New and Renewable Energy (MNRE) issued an official memorandum, which states that the time extension in scheduled commissioning of renewable projects due to the disruption of supply chains will be treated as a ‘force majeure’ event.

Earlier, the Ministry of Finance (Department of Expenditure Procurement Policy Division) had issued a clarification that Coronavirus will be covered in the force majeure clause and should be considered as a case of natural calamity. Further, the ministry had stated that this clause could be invoked wherever appropriate.

Track the latest developments and initiatives taken by the government to fight the economic repercussions of the pandemic in the renewable industry here.


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