Cash crunch affecting PSPCL working say PSEB Engineers
V K Gupta
06 April, 2012
The non payment of cash subsidy in full by the state government and inadequate tariff fixation are affecting the working of Punjab State Power Corporation Limited (PSPCL).
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H S BEDI, President of PSEB Engineers Association, said that the cash crunch being faced by PSPCL is the result of gap between the cost of power supply and revenue realized and non-payment of cash subsidy in full. The financial position of PSPCL has steadily deteriorated particularly since 2006.

ShareWhile the average revenue realization in paisa per unit was lower than the average cost of supply, the PSPCL/PSEB resorted to taking loans from banks and financial institutions to meet the operational expenditures. The quantum of such loans and interest progressively increased from year to year and is now showing a rising trend resulting in a position of debt trap.

The tariff increase allowed by Punjab State Electricity Regulatory Commission (PSERC) must include justified expenses in full such as power purchase, fuel and employees cost. The disallowances in annual revenue requirement(ARR) on account of employee expenses, fuel charges and power purchase expenses resulting from higher T&D losses by the PSERC have contributed to the financial crisis. The current gap between cost of supply and revenue realized is 30.2 paise per unit and this may increase drastically keeping in view the past trends of tariff orders.

While free power was given to agricultural and other selected categories, the subsidy was not paid by the State Government fully in cash but instead book adjustments were made against loan, and once the loan amount was exhausted, the book adjustment of Rs.983 crore was made in 2011-12 against RBI bonds issued by State Govt. in 2003.

Bedi said that in case the State Govt. requires PSPCL to purchase extra quantum of high cost power , the necessary funds for such extra power purchase must be given upfront by the State Govt. or alternatively PSPCL be allowed to recover these extra charges through a monthly adjustment in the consumer bills. The cost increases on account of power purchase rates, coal cost and increase in railway freight must be allowed by PSERC to be recovered from the consumers on a monthly basis through an adjustment / surcharge in the consumer billing.