(1) Interest and finance charges on loan capital shall be computed on the outstanding loans, duly taking into account the schedule of repayment, and the interest rate, in accordance with the terms and conditions of relevant agreements of loan, bond or non-convertible debentures. Exception can be made for the existing or past loans which may have different terms as per the agreements already executed if the Commission is satisfied that the loan has been contracted for and applied to identifiable and approved projects. For the purpose of tariff determination, the outstanding debt at the end of each year of the control period shall be taken as- Outstanding debt at the end of the n th year = Outstanding debt at the end of the (n-1) th year + (plus) sum of amount of debt related to assets capitalized under each investment scheme during the n th year – (minus) debt repaid during the n th year;
For the first year of the control period, the (n-1) th year shall be the base year;
Amount of debt related to assets capitalized under an investment scheme during the n th year = (70% or actual, whichever is higher) X (multiply) (amount of capitalisation approved by the Commission for such scheme in the n th year):
Provided that all loans considered for this purpose shall be identified with the assets created:
Provided further that the interest and finance charges of re-negotiated loan agreements shall not be considered, if they result in higher charges:
Provided further that the interest and finance charges on works in progress shall be excluded and shall be considered as part of the capital cost:
Provided further that neither penal interest nor overdue interest shall be allowed for computation of aggregate revenue requirement.
26 Compendium of HPERC Regulations, March 2021 1[(2) The interest rate on the amount of equity in excess of 30% treated as notional loan shall be the weighted average rate of the loans of the respective years and shall be further limited to the rate of return on equity specified in these regulations:
Provided that if there is no actual loan for a particular Year but normative loan is still outstanding, the last available weighted average rate of interest for the actual loan shall be considered:
Provided further that if the Distribution Licensee does not have actual loan, then one (1) Year State Bank of India (SBI) MCLR/any replacement thereof as notified by RBI for the time being in effect applicable for one (1) Year period, as may be applicable as on 1st April of the relevant Year plus 200 basis points shall be considered as the rate of interest for the purpose of allowing the interest on the normative loan.; and]
(3) In case any moratorium period is availed of in any loan, depreciation provided for in the tariff during the years of moratorium shall be treated, as notional repayment of loan during those years and interest on loan capital shall be calculated accordingly.
(4) The distribution licensee shall make every effort to refinancing the loan as long as it results in net benefit to the consumers. The cost associated with such refinancing shall be borne by the consumers and any benefit on account of refinancing of loan and interest on loan shall be shared in the ratio 50:50 between the licensee and the contingency reserve.
The licensee shall submit the calculation of such benefit to the Commission for its approval.
(5) In respect of foreign currency loans, variation in rupee liability due to foreign exchange rate variation, towards interest payment and loan repayment actually incurred, in the relevant year shall be admissible; provided it directly arises out of such foreign exchange rate variation and is not attributable to the licensee or its suppliers or contractors.
2 [(6) The licensee may hedge foreign exchange exposure in respect of the interest on foreign currency loan and repayment of foreign loan acquired for the distribution system, in part or in full at its discretion.
(7) The licensee shall be permitted to recover the cost of hedging of foreign exchange rate variation corresponding to the foreign debt, in the relevant Year as an expense, subject to prudence check by the Commission, and extra rupee liability corresponding to such variation shall not be allowed against the hedged foreign debt.
(8) To the extent that the foreign exchange exposure is not hedged, any extra rupee liability towards interest payment and loan repayment corresponding to the foreign currency loan in the relevant Year shall be allowed subject to prudence check by the Commission.]
3 [22. Interest Charges on Working Capital.—Rate of interest on working capital to be computed as provided hereinafter in these regulations shall be on normative basis and shall 1 Subs. vide Not. HPERC-F(1)-1/2018 dated 22nd November, 2018 published in R.H.P. dated 27th November, 2018 at p. 6265-6277. Before its substitution read as under:
“(2) The interest rate on the amount of equity in excess of 30% treated as notional loan shall be the weighted average rate of the loans of the respective years and shall be further limited to the rate of return on equity specified in these regulations.” 2 Add.sub. regulation 6,7, & 8 vide Not. HPERC-F(1)-1/2018 dated 22nd November, 2018 published in R.H.P. dated 27th November, 2018 at p. 6265-6277.
3 Subs. vide Not. HPERC-F(1)-1/2021 dated 30 th January, 2021 published in R.H.P. dated 4 th February, 2021at p. 7133-7135. Before its substitution read as under:
“22. Interest Charges on Working Capital.—Rate of interest on working capital to be computed as provided hereinafter in these regulations shall be on normative basis and shall be equal one (1) Year State Bank of India (SBI) MCLR/ any replacement thereof as notified by RBI for the time being in effect applicable for one (1) Year period, as may be applicable as on 1st April of the Financial Year in which the Petition is filed plus 300 basis points. The interest on working capital shall be Compendium of HPERC Regulations, March 2021 27 be equal one (1) Year State Bank of India (SBI) MCLR/any replacement thereof as notified by RBI for the time being in effect applicable for one (1) Year period, as may be applicable as on 1st April of the Financial Year in which the Petition is filed plus 300 basis points. The interest on working capital shall be payable on normative basis notwithstanding that the licensee has not taken working capital loan from any outside agency or has exceeded the working capital loan including rate of interest based on the normative figures. The Commission shall calculate working capital requirement for wheeling and retail supply business in accordance with these regulations to arrive at working capital requirement of distribution licensee.]