Economy

Power Ministry relaxes Discom payment security mechanism as lockdown hampers bill collection

Twesh Mishra New Delhi | Updated on March 29, 2020 Published on March 28, 2020

The order will be in effect till June 30, 2020

The Ministry of Power has relaxed the payment security mechanism to be ensured by power distribution companies (Discoms). This has been done to give support to Discoms that are finding it difficult to collect payments for bills raised on consumers in light of the coronavirus lockdown.

“Many consumers of the Discoms are unable to pay their dues. This has critically affected the liquidity position of the Discoms thereby impairing their ability to make timely payments to generating and transmission companies and maintaining letter of credit,” an order from the Ministry of Power said.

“Considering the unprecedented and force majeure situation, it has been decided that power may be scheduled even if payment security mechanism is established for 50 per cent of the amount for which payment security mechanism is to be otherwise established contractually. This order shall be in effect till June 30, 2020,” the Power Ministry said.

“We will also request States not to charge a late payment surcharge on end consumers who are not able to pay bills timely because of the Cocid-19 lockdowns,” Minister of State (Independent Charge) for Power and New and Renewable Energy RK Singh said.

Normally, Discoms maintain a payment assurance for all the power that they intend to procure from a power generator (Genco). This is done to prevent build up of dues as Discoms were notorious for delaying payments to Gencos. The prepayment for power procurement mechanism was in place since June 28 last year.

Impact of the lockdown

Trouble for power sector multiplied manifold when Prime Minister Narendra Modi announced a 21-day lockdown to prevent the spread of COVID-19 pandemic.

According to Shailendra Dubey, Chairman, All India Power Engineers Federation (AIPEF), power demand in the states across the country has come down by 20-30 per cent and their major source of income from high end earning sources like the Railways, industrial and commercial consumers have been blocked due to complete shutdown.

“The containment measures have resulted in a sudden fall in electricity bill collections of the Discoms by 80 per cent over the last few days. The sudden fall in collections has resulted in the inability of Discoms to make daily payments not only to generators which in turn is affecting the coal payments and coal transport by railways, but also debt servicing to banks and financial institutions,” Dubey said.

Cheap power on the energy exchange

Commenting on the centre’s move, a statement from IEX said that there is adequate power supply available on its platform and urged stakeholders in the ecosystem to leverage the lower exchange costs.

“The average price for March is currently at ₹2.49 per unit and average price since March 22 is at ₹2.15 per unit. The company estimates that rates may continue to be on the lower side as the Covid-19 situation unfolds,” an IEX statement said.

The Power Ministry said that directions have also been issued to the Central Electricity Regulatory Commission to provide a moratorium of three months to Discoms to make payments to generating companies and transmission licensees and not to levy penal rates of late payment surcharge.

State Governments are being requested to issue similar directions to State Electricity Regulatory Commissions, the official statement said.

Adequate coal supplies

A statement from the Coal Ministry said that coal supplies are declared as an essential service. The Centre and coal companies are working harder to ensure that critical coal supplies are maintained during the lockdown period due to Covid-19 pandemic so that power and other critical sectors are unaffected due to the current situation, a statement from the Coal Ministry said.

Coal stocks at power plants stand at 41.8 million tonne, equivalent to 24 days consumption, as of March 26, 2020.

Published on March 28, 2020

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.