Govt asks gencos, transcos to charge late fee less than 12% per annum from discoms

• The rate of LPS in many cases ranges upto 18 percent per annum and has adversely impacted discoms during this difficult phase of lockdown, said an official statement

• This will help consumers by maintaining smooth power supply and reduction in charges despite the difficult times, it added

New Delhi: In order to alleviate the financial stress in the power sector, the Centre has asked all power generating companies and transmission companies to charge Late Payment Surcharge at a rate not exceeding 12 percent per annum (simple interest) for all payments made by discoms under the Liquidity Infusion Scheme of state-run Power Finance Corporation (PFC) and REC Limited under Atmanirbhar Bharat. The measure is expected to ease the financial burden on discoms.

"In general, the applicable rate of Late Payment Surcharges is quite high despite the fact that interest rates in the country have softened over the last few years. The rate of LPS in many cases ranges upto 18 percent per annum and has adversely impacted discoms during this difficult phase of lockdown imposed on account of the COVID-19 pandemic," an official statement released by the Ministry of Power said on Saturday.

'Measures to aid discoms will ensure smooth power supply to consumers'

The COVID-19 pandemic has adversely affected the liquidity position of all stakeholders of the power sector, especially distribution companies. "A number of measures have been taken by the government to mitigate the adverse impact, which include rebate on capacity charges, relaxing provisions of Letter of Credit for scheduling of power, Liquidity Infusion Scheme, etc. One of the measures taken is with regard to Late Payment Surcharge (LPS), which becomes applicable in case of delayed payments by distribution companies to the generating companies and transmission licensees for power purchase/ transmission of electricity for the period up to 30.06.2020.  This will help consumers by maintaining smooth power supply and reduction in charges despite the difficult times," said the statement.

Also read: Rs 90K crore package: Cabinet eases working capital limit for discoms to get loan

The backdrop

The announcement comes just days after the Cabinet Committee on Economic Affairs (CCEA) approved a proposal on August 19 to relax working capital norms for discoms seeking loans from state-run PFC and REC under the Rs 90,000-crore package. The move has allowed more discoms to seek funds under the package as many were not eligible because they did not meet the working capital limit norms under the UDAY scheme. The Centre had announced the Rs 90,000-crore package for discoms earlier in May this year to revive cash flow in the stressed power sector.

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