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Motilal Oswal Report
The Ministry of Power has issued a notification on late payment surcharge (LPS).
As per the new rules, LPS would be based on one-year State Bank of India’s marginal cost of funds based lending rate versus a fixed rate of 18% per annum specified in the tariff regulations issued by Central Electricity Regulatory Commission. In the current scenario, this would imply a LPS of 12-15% p.a.
We note that -
1. despite the 18% p.a. CERC specified rate, NTPC Ltd. is currently charging 12% p.a. on overdue, which are settled under the Atmanirbhar scheme, and
2. NTPC’s working capital borrowing cost has also declined approximately 300 basis point over the past one year, thereby softening the impact of lower LPS rate.
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