MERC Offers Compensation To SJVNL On Delayed Payment From MSEDCL

MERC Offers Compensation To SJVNL On Delayed Payment From MSEDCL

Maharashtra Electricity Regulatory Commission (MERC) released an order in response to a petition filed by SJVNL, seeking payment of outstanding dues from its wind energy projects in Maharashtra. SJVNL also urged the state power regulator to penalise MSEDCL for their alleged delay in payments. The State Commisson, after hearing the arguments of the petitioner and the respondents asked MSEDCL to pay around Rs 10.32 crore to SJVNL. 

This included a late payment surcharge of Rs 6,81,25,529 and an interest of Rs 3,50,75,440 on the late payment of LPS (Late Payment Surcharge). 

MERC, in its order mentioned, “SJVNL claimed LPS amounts of Rs. 22,17,36,151 computed at 1.25% monthly interest rate on principal outstanding. This is from January 2014 to November 2022. Whereas MSEDCL in its submission has submitted that outstanding LPS is only Rs. 1,51,79,260/- from April 2020 to November 2022 after adjusting for Rs. 3,39,17,127/- DPC already paid from April 2022 to March 2023 and Rs. 1,31,94,164/- towards interest paid by MSEDCL for Bill Discounting Facility.”

On this MERC remarked, “Such interest is computed post payment of the principal amount for the period between the date of a principal payment and date of LPS payment. LPS amount is yet to be paid, hence for computation, the end date is considered as 31 July 2024.”

On Late Payment 

MERC responded to the question of deciding the due date for making the payment. In its response, it mentioned that any suit or proceeding initiated post-30 May 2022 for a billing invoice having a due date between 15 March 2017 to 28 February 2019 is time-barred. In the present case, some of the claims are on invoices whose due date is between 15 March 2017 to 28 February 2019. As the petition has been filed on 31 March 2023 i.e. beyond the extended period of limitation (30 May 2022), all the claims whose due date for payment is before 28 February 2019 are barred by law of limitation and hence cannot be allowed.

Non-Submission Of Bill Discounting

On the issue of non-submission of bill discounting, the petition mentions, “SJVNL earlier availed the ‘Bill Discounting Facility’ of Rs. 30 Crores from MSEDCL against their outstanding Invoice for which MSEDCL had to incur a cost of Interest on Bill Discounting of Rs. 1,31,94,164. Therefore, MSEDCL may be allowed to deduct the interest amount from DPC payable to SJVNL because MSEDCL has to bear the interest cost which will effectively mean double loss to MSEDCL.”

To this, the SJVNL said, “MSEDCL is misleading regarding the Bill Discounting Facility. MSEDCL was not able to pay even the energy bills on time, SJVNL offered Bill Discounting Facility amounting to Rs. 30 Crores which was a banking arrangement, where outstanding payment was paid to SJVNL by the Bank and MSEDCL had to pay back the discounted amount to bank after one year. The interest amount for this arrangement was paid upfront by MSEDCL at the rate of 4.36% per annum. The interest paid on bill discounting facility is not payment towards LPS/DPC.”

MERC in its response said, “SJVN had previously utilized a Bill Discounting Facility of Rs. 30 Crores from MSEDCL for outstanding invoices. MSEDCL incurred an interest cost of Rs. 1,31,94,164 for this facility. Therefore, MSEDCL should be allowed to deduct this interest from the DPC payable to SJVN, as the interest cost represents a double loss for MSEDCL.”

SJVN countered, “MSEDCL is misleading regarding the Bill Discounting Facility. MSEDCL was unable to pay energy bills on time, prompting SJVN to offer a Bill Discounting Facility amounting to Rs. 30 Crores through a banking arrangement. The bank paid SJVN upfront, and MSEDCL was to repay the discounted amount to the bank after one year. MSEDCL paid the interest on this facility upfront at a rate of 4.36% per annum. This interest payment is not related to LPS/DPC.”

MERC responded, “The Commission notes the submission of SJVNL that it had offered Bill Discounting Facility amounting to Rs. 30 Crores which was a banking arrangement, where the outstanding payment was paid to SJVNL by the Bank and MSEDCL had to pay back the discounted amount to the bank after one year. The interest amount for this arrangement was paid upfront by MSEDCL at the rate of 4.36% per annum which is much lower than DPC rate of 15% per annum and hence saving to MSEDCL. Therefore, such interest payment by MSEDCL towards bill discounting should not be considered as payment against LPS due to SJVNL.”

The Commission accepted this submission of SJVNL as in case MSEDCL had not opted for Bill Discounting and delayed the payment then it would have to pay LPS at a rate of 15% per annum. By opting for Bill Discounting at an interest rate of 4.36% per annum, it has saved expenses on LPS. Accordingly, the Commission has not considered such interest paid by MSEDCL for bill discounting for adjustment against the outstanding LPS claim of SJVNL.