Power utility runs into huge overdraft
Rakesh Lohumi
Tribune News Service

Shimla, June 17
The contra-banking of power during current summer has created a financial crisis for the state power utility which is running a huge overdraft of over Rs 640 crore. The utility the assets and functions of which have been vested in the government under the ongoing restructuring exercise has been in the red and its accumulated loss has crossed Rs 260 crore.

Its cash-flow position has worsened as under the contra-banking arrangement surplus power supplied to deficit neighbouring states during summer months will be returned during the lean winter months. It is not receiving the usual revenue from sale of power during summer.

The financial health of the utility has not improved despite annual increase in tariff by the state electricity regulatory commission over the past five years. The employees have been claiming that consumers will have to pay more after unbundling as electricity will become dearer. However, the fact was that successive tariff hikes have increased the average sale price of power from Rs 1.90 paise per unit in 2003 to Rs 3.70 paise in 2008.

The government has been paying a subsidy of Rs 140 crore annually to the 16 lakh domestic consumers which means that on average every consumer is receiving a subsidy of Rs 900 which was a huge amount. Worst, the financial health of the board is not improving due to ever-increasing employee cost and reluctance to carry out unbundling and other reforms. The employee cost of Rs 1.05 per unit is the highest in the country. With the impeding revision of pay scales, an additional burden of Rs 150 to Rs 170 crore will further increase the employee cost to around Rs 1.30 per unit.

In the tariff application 2009-10 the aggregate revenue requirement (ARR) has been projected at Rs 2853 crore as against the expenditure of Rs 2021 crore in 2008-09, an increase of over 40 per cent. Even if the commission allows a hike of 20 per cent the average tariff will shoot to Rs 4.60 per unit, major brunt of which will have to be borne by the domestic consumers as the power subsidy has been frozen at the level of Rs 140 crore under the agreement signed by the government with the World Bank for availing Rs 900 crore development policy loan.