The power ministry has proposed to cap the late payment surcharge payable by discoms to 12 per cent per year.
In order to alleviate the financial stress in the power system, all power generation and transmission companies have been advised by Ministry of Power to charge Late Payment Surcharge at a rate not exceeding 12 per cent per year (simple interest) for all payments made under the Liquidity Infusion Scheme of PFC and REC under Atmanirbhar Bharat. With this measure the financial burden on discoms will ease out, a recent government release said.
In general, the applicable rate of late payment surcharges 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.
“In general, the applicable rate of late payment surcharges is quite high despite the fact that interest rates in the country have softened over the last few years.”
COVID-19 pandemic has adversely affected the liquidity position of all stakeholders of power sector especially distribution companies. 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 Late Payment Surcharge (LPS), which becomes applicable in case of delayed payments by distribution companies to the generating companies and transmission licensees for power purchase/ transmission of electricity for the period up to June 30, 2020.
This will help consumers by maintaining smooth power supply and reduction in charges despite the difficult times, the release added.
