The outbreak of COVID-19 has created an unprecedented situation, causing far-reaching consequences for both businesses and consumers across the country.
In a circular issued on February 19, 2020, the government had clarified that the spread of Coronavirus should be treated as a case of natural calamity, and a force majeure clause can be invoked for the same. The central government announced a complete lockdown of the country on March 24, 2020, to arrest the spread of the virus.
Following the lockdown order, all the distribution companies (DISCOMs) operating in the state of Uttar Pradesh are faced with an imposing challenge of a substantial reduction in collections. According to a notice released by the Uttar Pradesh Power Corporation Limited (UPPCL), the massive disruption in economic activity due to the lockdown is likely to affect a significant proportion of consumers’ capacity to pay electricity bills on time.
The DISCOMs are trying to help consumers meet the challenge with a campaign for promoting online payments and offering discounts for timely payments. DISCOMs are the first in the value chain to be affected by the cash flow crunch being faced by the public and communities. Eventually, there will be a ripple effect reaching the upstream utilities in the power sector value chain.
The government of Uttar Pradesh has requested the Ministry of Power (MoP) to pass suitable instructions to the Ministry of Coal and the Railways Ministry to issue necessary instructions not to insist on advance payments from generators for supply and movement of coal. The present notice is being issued under the power purchase agreement (PPA), notifying the events affecting the performance of obligations of UPPCL under the PPA. The document underlines that there is a need for different agencies such as the Railways and Coal India to work together to maintain a continuity of supply from generating stations.
Meanwhile, the Ministry of Power has also issued a directive which states that the power may be scheduled even if the payment security mechanism is reduced by 50% against the initial contract. The order will be valid until June 30, 2020. “Due to this (COVID-19 pandemic), 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 of generating and transmission companies and maintaining Letter of Credit,” states the circular.
Earlier, according to the order issued by the Ministry of Home Affairs, all offices of the government of India, its autonomous and subordinate offices, and pubic corporations will remain closed except certain essential services, including power generation and transmission units.