NTPC Limited has agreed to defer the capacity charges and provide rebates to distribution companies (DISCOMs) to the tune of ₹34.27 billion (~$455 million) during the nationwide lockdown.
The government-owned power generator allowed the capacity charges of ₹20.64 billion (~$274 million) to be deferred until the end of the lockdown. These charges are to be paid by DISCOMs later without interest in three equal monthly installments, according to a BSE India filing posted by the company.
The capacity charge is one of the fixed charges that are to be paid by the DISCOMs. Fixed charges are designed to recover the costs of the DISCOMs, which are fixed in nature, such as the capacity charges payable to power generators, transmission charges, operation and maintenance expenses, depreciation, interest on loans, and return on equity. Capacity charges are assessed based on the highest forecasted amount of electricity a consumer is expected to use during a specified period. Because of the dip in power demand from industrial consumers due to the lockdown, DISCOMs have been unable to recover these charges to pay generators.
Additionally, NTPC will also provide a rebate of ₹13.63 billion (~$180.9 million) on capacity charges billed during the lockdown period to DISCOMs in light of the coronavirus crisis during the financial year 2020-21.
NTPC, however, noted that these amounts were provisional and may vary once reconciled with the regional power committee’s (RPC) data.
In May 2020, NTPC Limited submitted a BSE filing that said that the deferment and rebate of these charges were being discussed within the company following an advisory from the Ministry of Power (MoP) asking the company to consider these relief measures to DISCOMs amid the COVID-19 pandemic. The MoP noted that this rebate to DISCOMs would ultimately be passed down to the end consumer.
In its advisory, the Ministry had asked NTPC to consider the deferring capacity charges for power that has not been scheduled. It asked them to make these charges payable without interest in three equal monthly installments after the lockdown ended. The Ministry also asked the company to provide rebates of around 20-25% on fixed costs to DISCOMs.
Previously, Mercom reported that because of the lockdown, consumers were unable to pay the dues to distribution companies, which has affected the liquidity position of the DISCOMs. However, their finances have been a mess even before this crisis. They are finding it hard to pay to the generating and transmission companies. Acknowledging the issue, the Union Power Minister announced some relief measures for the power sector. The Ministry directed the Central Electricity Regulatory Commission (CERC) to provide a moratorium of three months to DISCOMs to make payments to the generating companies and transmission licensees and not levy any penalties for late payments. The Ministry has also requested the state governments to issue similar directions to state electricity regulatory commissions.
Recently, Mercom reported that the Power Grid Corporation of India Limited approved a ₹10.75 billion (~$142.5 million) consolidate rebated as a one-time measure to DISCOMs and power departments of states and union territories. The state-owned power transmission company had previously received a letter from the MoP to consider offering a rebate of about 20-25% to DISCOMs on inter-state transmission charges.
Nithin is a staff reporter at Mercom India. Previously with Reuters News, he has covered oil, metals and agricultural commodity markets across global markets. He has also covered refinery and pipeline explosions, oil and gas leaks, Atlantic region hurricane developments, and other natural disasters. Nithin holds a Masters Degree in Applied Economics from Christ University, Bangalore and a Bachelor’s Degree in Commerce from Loyola College, Chennai. More articles from Nithin.