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Power Ministry warns discoms to pay bills on time, promises more funding

MUMBAI : The central government intends to infuse liquidity into financially frail public power distribution companies (discoms), a press release from the Ministry of Power said. While these efforts are ongoing, discoms must pay their bills to power generators on time despite the ongoing covid-19 crisis and the national lockdown, the ministry clarified.

“Efforts are being made to infuse some liquidity in the power sector, the details of which would be shared with discoms shortly," the press release said. “However, discoms may also raise funds, if required, to meet this crisis." The obligation to pay for power within 45 days of the presentation of the bill or as provided in the PPA (power purchase agreement) remains unchanged, the release said.

In order to ensure continuous power supply through the pandemic, in March, the Ministry of Power said that generators should not stop supplying power to discoms despite their substantial outstanding dues. As of March, discoms owe over ₹ 88,000 crore to generators, according to data from the government’s Praapti portal. The ministry had directed the Central Electricity Regulatory Commission (CERC) to offer a moratorium of three months to discoms struggling to pay bills to generation and transmission companies and not levy penalties on late payments.

Public sector discoms in states including Andhra Pradesh and Madhya Pradesh invoked force majeure, citing the ministry’s directive, to keep their bills pending.

In its clarification on Monday, the ministry has now said discoms will have to meet their dues as per their original deadlines, that is, within 45 days of the presentation of the bill or as provided in the PPA, and no moratorium is offered. However, it has granted partial relief on late payment charges.

“In case of nonpayment of dues within the stipulated period, late payment surcharge is applicable which in most cases goes upto 18% per year," the press release said. “Keeping in mind the present situation, the Government of India have advised the CERC to reduce the rates of late payment surcharge applicable for the period 24 March 2020 to 30 June 2020. From 1 July, the delayed payment surcharge shall apply at the rate given in the PPA." The obligation to pay for capacity charges as per the PPA shall continue, as does the obligation to pay for transmission charges, the press release said.

Mint reported on 1 April that after the central and state governments offered concessions on tariffs and payment deadlines to electricity consumers and distribution companies, power generators were faced with extended working capital cycles that left them in precarious financial positions. Power demand fell roughly 25-30% across the country in March, information from power generators has revealed, as covid-19 lockdown has brought nearly all economic activity in the country to a halt.