CERC reduces late payment surcharge for discoms

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Published: April 4, 2020 1:45:24 AM

Additionally, the quantum of advance payment that discoms need to furnish as security has been reduced to half till June 30.

This will provide some relief to the stressed discoms as they are finding it difficult to continue meter reading exercises.

The Central Electricity Regulatory Commission (CERC) has reduced the rate at which power distribution companies (discoms) will have to pay penalties against delays in payments scheduled between March 24 and June 30. The regulator, in an order issued on Friday, has reduced the late payment surcharge for the aforementioned period from the usual rate of 1.5% to 1%.

This will provide some relief to the stressed discoms as they are finding it difficult to continue meter reading exercises and collect payments from consumers amid the countrywide lockdown to contain the outbreak of the coronavirus.

Acknowledging that power generating and the transmission companies will have to continue bearing the interest cost on their working capital loans, CERC did not allow any moratorium on monthly bills payable by the discoms to these entities. Welcoming CERC’s decision, Pratik Agarwal, managing director, Sterlite Power, said ‘this will ensure smooth functioning of the entire power sector, and avoid liquidity issues at this important hour where grid security is of utmost importance’.

Invoking section 107 of the Electricity Act — which empowers the central government to issue ‘directions in matters of policy involving public interest’ — the power ministry has directed CERC to reduce the penalty rate for late payment surcharges. The Union power ministry has already asked state-run power generating companies such as NTPC and Power Grid Corporation of India (PGCIL) not to curtail supply to the states even if the discoms do not clear payments to them on time.

Additionally, the quantum of advance payment that discoms need to furnish as security has been reduced to half till June 30. The Union power ministry had implemented the letter of credit (LC) mechanism since August 2019, which makes it mandatory for discoms to issue advance LCs worth the total value of power to be supplied. Now, the LCs can be 50% of the worth of electricity.

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