Pay Point India develops prefunded model of electricity payments for CSPDCL

Pay Point India Network has announced that it has tied up with the Chhattisgarh State Power Distribution Company (CSPDCL) for a unique method of collecting customer dues which can serve as a model for other electricity utilities in the country. The company is now planning to roll out this model to the rest of India and is in talks with several state power utilities across the country.

Pay Point, which has applied for Payments BankingLicense, prepays the dues of customers to CSPDCL and then collects the same through a network of its customer service points (its authorized dealers). This is done through its technology infrastructure thatenables customers to pay their utility bills even at the last minute.

This model assumes significance as the state power utilities are often unable to secure their payments from errant customers. Even if money is paid, it takes 3-5 days to reach the utility provider’s bank account causing cash flow problems and raising the cost of funds as the interest cost on the borrowings of these utilities is very high. It is these kind of outstanding by customers that has led to an ailing power sector. The government has then had to bail out through subsidies.

The hilly and dangerous nature of certain terrain means that often the utility’s officials have problems in reaching the customers leave alone collect money from them, this is where the Pay Point model has proved to be a success with the company managing to pay the utilities in advance as well as secure payments from customers later.

“We see great potential in this model and are now planning to scale this up. We are in advanced discussions with several electricity boards and many of them have evinced keen interest in this model.  Power companies can focus on their core function of generatingdistributing power while we help secure their payments,” said Mr.Ketan Doshi.

One such zone where Pay Point opened its franchisees / dealers to service consumers was Dhamatari&Bematra in Chhattisgarh, a rural / naxal area. This place was previously inaccessible to utility officials.  Pay Point has facilitated transaction worth Rs.77.41 lac by servicing 2.66 lac consumers in the above mentioned rural / naxal areas from January 2014 till date. The company has so far collected Rs. 1058 lakh in the entire state till date from about 16.77 lakh customers.

The World Bank had warned in early 2014 that the country’s power sector faces annual losses of USD 27 billion by 2017 unless sweeping reforms are taken up. One key improvement area identified has been tackling inefficient subsidies. As per the World Bank’s calculations 15,000 hospitals and 123,000 schools could have been developed in 2011 if the states had not been required to pump money into utilities to keep them afloat.

The replication of the CSPDCL - Pay Point India Network model can make a vital contribution in stemming these losses.