Govt cuts late payment surcharge as interest rates drop

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Govt cuts late payment surcharge as interest rates drop

Last Updated : 12 Oct 2020 12:35:44 PM IST

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The Ministry of Power has issued the Draft (Late Payment Surcharge Electricity Rules, 2020, to reduce the extremely high rates of late payment surcharge.

The Ministry of Power noted that it is necessary that the rates of late payment surcharge reflect the current cost of borrowing.

"It has been noted that the rates in vogue were fixed when the lending rates were high", the Ministry said. The attention of the government has been drawn towards the extremely high rates of late payment surcharge.

Late payment surcharge will be applicable on the payments outstanding after the due date at the applicable bank rate for supply or transmission of power.

The rate at which late payment surcharge is applicable payable on outstanding amount shall increase by 50 basis points each month after the expiry of first month, subject to a maximum of applicable bank rate plus 200 basis points.

The rate shall not be higher than the rate provided in the agreement for transmission of power. All payments by a distribution company to a transmission company will be adjusted first towards late payment surcharge and then monthly charge.

Bank rate means marginal cost of funds for one year of the State Bank of India plus 500 basis points.