The Government of India’s decision to impose a nationwide lockdown from March 23, 2020, to contain the spread of COVID-19 pandemic, has had a big impact on the power sector. In Punjab, like other states, the lockdown has led to the lowering of power demand, with the demand from the industrial category dwindling to almost zero. Considering the unprecedented situation, the Punjab State Power Corporation Limited (PSPCL) in a letter to developers has requested them to provide a 10% discount on the power tariff to be billed from July 01, 2020.
The letter noted that the ensuing COVID-19 pandemic and the subsequent lockdown affected the collection of PSPCL, which provided constant power supply to health centers, hospitals, and quarantine centers across the state for their smooth functioning.
Further, PSPCL stated that CERC and PSERC had established the tariff as per the power purchase agreement (PPA). While determining the rate, the Central Electricity Regulatory Commission (CERC) and the Punjab State Electricity Regulatory Commission (PSERC) had taken into account the interest on loan capital as 13% to 13.5%. These rates have reduced considerably over the period. PSPCL in the letter said that the Reserve Bank of India (RBI) had come up with several steps to ease the financial owes of the commercial sector. The RBI reduced the repo rate, which effectively brought down interest rates for term loans taken by generating companies.
The year 2019 was marred when the Andhra Pradesh government decided to retroactively review the PPAs signed between the state’s electricity distribution companies and power generators to renegotiate tariffs. The growth in the industry suffered a huge setback, not to mention the adverse effect it had on investor sentiments. And now Punjab seems to be following the same route.
PSPCL also added that solar energy tariff has come down significantly and is currently around ₹2.55 (~$0.03)/kWh as compared to the tariff of ₹5.8 (~$0.07)/kWh to ₹5.95 (~$0.08)/kWh which is being paid to the generating companies. PSPCL added that it has been paying at the rate of ₹5.8 (~$0.07)/kWh to ₹5.95 (~$0.08)/kWh for the last four years.
The situation caused by the COVID-19 crisis means that the consumers will be unable to pay their dues to PSPCL fully, and this will adversely affect its capabilities to pay to the generators. Considering these factors, PSPCL has requested the developers to grant them relief on the energy being billed from July 01, 2020.
In April this year, PSPCL introduced an innovative plan calling on all its consumers to make payment in advance towards their estimated electricity bills up to March 2021. The customers were given the freedom to pay to the extent they could through digital modes and earn interest @1% per month on the advance payment. The DISCOM said that it had received an advance payment of ₹350 million ($4.61 million) in less than a week.
Power is designated as an essential service by the Ministry of Home Affairs. During the lockdown, power generators (including renewables) in the country were ordered to maintain an uninterrupted supply of power across states even if the distribution companies deposit Letters of Credit for 50% of the cost of power they want to be scheduled. For payments delayed beyond 45 days (from March 24, 2020, and June 30, 2020), the late payment surcharge was also reduced to 12% per annum from the earlier 18%.
Notably, the Central Government had announced that DISCOMs would receive ₹900 billion (~$12.03 billion) as part of the Government of India’s stimulus package to help the Indian economy recover from the coronavirus crisis.
Previously, Mercom had reported how DISCOMs were weighing down the entire power sector with their inability to pay power generators on time, manage their losses, and iron out other inefficiencies.
Rakesh is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). More articles from Rakesh Ranjan.