MoP Proposes Extending Late Payment Surcharge Rules to Standalone Energy Storage Providers
The Ministry of Power has proposed extending Late Payment Surcharge Rules to standalone energy storage providers, introducing mandatory payment timelines, surcharge on delayed payments and payment security mechanisms.
November 12, 2026. By Mrinmoy Dey
The Ministry issued a draft amendment on November 10, 2026, inviting stakeholder comments within 30 days, with December 10, 2026, as the deadline for submissions.
The proposed amendment seeks to address the regulatory gap for standalone Energy Storage Service Providers (ESSPs), which currently do not automatically enjoy the payment protections available to energy storage systems owned by generating companies under the existing framework.
The draft introduces a definition of an ‘energy storage service provider’ as an entity providing energy storage services or supplying electricity using an ESS that is not directly owned by a generating company, transmission licensee, distribution licensee or end consumer.
Under the proposed provisions, payments to ESSPs will be governed by the timelines specified in the relevant agreements. In the absence of specified timelines, payments will be due within 45 days of bill presentation.
The amendment also proposes a late payment surcharge linked to the State Bank of India's (SBI) one-year Marginal Cost of Funds-based Lending Rate (MCLR), plus 5 percent. The surcharge will increase by 0.5 percent for every subsequent month of delay, subject to a maximum increase of 3 percent over the initial rate.
Additionally, distribution companies (DISCOMs) will be required to maintain bank Letters of Credit (LCs) as payment security, enabling standalone storage providers to draw funds in case of payment defaults.
The proposed framework also provides for market access restrictions against defaulting DISCOMs. If payment defaults continue beyond two and a half months, the concerned DISCOMs will be barred from procuring power through short-term markets and power exchanges. Continued defaults could also lead to progressive curtailment of long-term power supplies.
The proposed changes come as India scales up its energy storage capacity to support renewable energy integration and manage peak electricity demand. Battery Energy Storage System (BESS) capacity is projected to increase from around 15 GWh in October 2026 to 321 GWh by 2035–36, while pumped storage hydro capacity is expected to rise from 44 GWh in September 2026 to 630 GWh over the same period.
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