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

Twesh Mishra New Delhi | Updated on March 29, 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

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