Power Ministry advises gencos to cap late payment surcharge at 12%

Power ministry has advised power generation and transmission firms to levy the late payment surcharge on discoms at not more than 12% in view of the stress in the sector amid Covid-19 pandemic

The power ministry hasadvised power generation firms and transmission companies to levy the late payment surcharge on discoms at not more than 12 per cent in view of the stress in the sector amid the COVID-19 pandemic.

The rate of late payment surcharge (LPS) in many cases is up to 18 per cent per annum and has adversely impacted discoms during lockdown.

The measure aims at easing the financial burden on discoms (power distribution utilities), and would also benefit consumers, a ministry statement said.

"In order to alleviate the financial stress in the power system , all generating companies and transmission companies have been advised by Ministry of Power to charge Late Payment Surcharge at a rate not exceeding 12 per cent per annum (simple interest) for all payments made under the Liquidity Infusion Scheme of PFC and REC under Aatmanirbhar Bharat," it said.

In general, the applicable rate of LPS is quite high despite the fact that interest rates in the country have softened over the last few years.

The pandemic has adversely affected the liquidity position of all stakeholders of the power sector especially discoms.

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 LPS, which becomes applicable in case of delayed payments by discoms to generating companies and transmission licensees for power purchase/ transmission of electricity for the period up to June 30, 2020, it said.

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