Discoms not able to meet their operating expenses in Haryana

HERC directed the discoms to restrict their cash and bank balances.
the story overview

The discoms of Haryana, namely, UHBVNL and DHBVNL are finding difficulty in meeting their operating expenses.

As a result, their dependence on the borrowings from commercial banks and financial institutions have increased.

There is an urgent need to optimise internal resource generation by improving billing.
mohnish kumar

Chandigarh

The power distribution companies or doscoms in Haryana, Uttar Haryana

Bijli Vitran Nigam Limited (UHBVNL) and Dakshin Haryana Bijli Vitran Nigam Limited (DHBVNL) are finding difficulty in meeting their operating expenses. As a result, their dependence on the borrowings from commercial banks and financial institutions have increased in the range of whopping 500 per cent from the period of 2006-07 to 2010-11. The dependence on borrowed funds of UHBVNL increased as borrowings increased from Rs 1782.44 crore in 2006-07 to Rs 10, 195.51 crore in

2010-11. This shows an increase of huge 471.94 per cent. The accumulated losses in Uttar Haryana Bijli Vitran Nigam Limited (UHBVNL) increased

from Rs 1059.97 crore in 2006-07 to RS 3819.86 crore in 2010-11.

To meet the operating expenses the company mainly depended on increased borrowings in the form of cash credit or loans from commercial banks or financial institutions. If the dependence on borrowings increased by a whopping 471.94 per cent in case of UHBVNL, DHBVNL also witnessed a similar dependence and witnessed a jump of 443. 25 per cent in the same period. In DHBVNL, the accumulated losses increased from Rs 714.34 crore in 2006-07 to Rs 2307.18 crore in 2010-11 and depended on increased borrowings in the form of cash credit/ loans from commercial banks or financial institutions.

The dependence on borrowed funds increased during the period from Rs 887.58 crore in 2006-07 to Rs 4821. 76 crore. This represents an increase of huge 443.25 per cent in 2010-11. “There is an urgent need to optimise internal resource generation by improving billing and collection efficiency and vigorous follow up of outstanding government dues,” said an official of a discom on the condition of anonymity. Efficient fund management serves as a tool for decision making, for optimum utilisation of available resources and borrowings at favourable terms at appropriate time.

For effective and efficient plans, the management of the company should focus on key areas of financial management which include revenue collection, billing, borrowings, grants, transfer of funds, interest recovery/payments, restructuring of loans, security deposits, bank reconciliations and other related transactions. The senior officers of UHBVNL, agreed to the contention that the company had to resort to loans in order to cover its operating expenses in view of significant accumulated losses which were due to increase in employee cost, power purchase cost, increase in receivables from consumers and non-revision of tariff for nine years.

The Haryana Electricity Regulatory Commission (HERC) directed the discoms to restrict their cash and bank balances to a level of seven days of collection by the end of 2005-06. However, the cash and bank balances of DHBVNL during 2006-07 to 2010-11 ranged between 18 days and 29 days. The company had not been able to reduce the cash and bank balances to seven days of collection as directed by the regulatory commission, whereby it could have reduced interest burden considerably which in turn would have eased the financial position and helped in keeping the sale rates of electricity on lower side thus providing some relief to the consumers.