Power Ministry suggests 12 per cent cap on Late Payment Surcharge by Gencos and Transcos

Our Bureau New Delhi | Updated on August 22, 2020

The Ministry of Power has advised all Generating Companies and Transmission Companies to cap Late Payment Surcharge at 12 per cent per annum (simple interest). This has been suggested for all payments made under the Liquidity Infusion Scheme of Power Finance Corporation (PFC) and REC under Atmanirbhar Bharat.

With this measure the financial burden on Power Distribution Companies (Discoms) will ease out and alleviate the financial stress in the power system, an official statement said.

“In general, the applicable rate of Late Payment Surcharges (LPS) is quite high despite the fact that interest rates in the country have softened over the last few years. The rate of LPS in many cases ranges up to 18 per cent per annum and has adversely impacted discoms during this difficult phase of lockdown imposed on account of Covid-19 pandemic,” the statement said.

Mitigating Covid impact

Covid-19 pandemic has adversely affected the liquidity position of all stakeholders of power sector especially, distribution companies.

Several measures that have been taken by the Government to mitigate the adverse impact, include rebate on capacity charges, relaxing provisions of Letter of Credit for scheduling of power, Liquidity Infusion Scheme, among others.

Another measures that has been taken is about the LPS, which will become applicable in case of delayed payments by discoms to the generating companies and transmission licensees for power purchase or transmission of electricity for the period up to July 30, 2020.

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

Published on August 22, 2020

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