Himachal Power Board
Delay in unbundling causes financial mess
Rakesh Lohumi
Tribune News Service

Shimla, July 12
The ever increasing bank overdraft of the state power utility, which has touched a whopping Rs 700 crore, has put both the state electricity regulatory commission and the government in a bind.

The financial mess being created due to delay in unbundling of the state electricity board has become obvious by the huge revenue gap being bridged through overdraft, almost one-third of the aggregate revenue requirement (ARR) of Rs 2,021 crore approved by the commission for the year 2008-09.

The state power utility had already sought a hike of 20 per cent in the ARR for 2009-10. In the situation if the commission decides to cover the deficit through additional revenue generation, the electricity tariff will have to be increased by at least 40 per cent.

The average electricity tariff will thus go up from Rs 3.70 to over Rs 5 per unit. Alternately, if the government expedites unbundling, it will have to liquidate the existing liabilities which means additional financial burden of Rs 800 crore.

The first step towards unbundling has already been taken by vesting the assets and functions of the board in the government. The more the government delays the process of restructuring, the more financial burden it would have to bear.

The financial position has worsened due to the contra-banking of power under which electricity is being supplied to Punjab during summer on returnable basis to meet the demand in winter when the state faces shortage. As a result, power utility is being denied the much needed cash on one hand, and on the other the state is forced to impose power cuts in industrial areas even during summer.

The state is not surplus in power as evident from the data in the multi-year tariff application. The commission had approved Rs 1,310 crore for power purchase for the last year against which the board spent over Rs 1,500 crore.

The projected requirement for power purchase for 2009-10 is as high as Rs 1,640 crore, mainly because the state has been left with little surplus power due to sharp increase in demand for industrial power over the past three years. It has been left with no option but to purchase more power from other states at very high rates to meet the shortfall during the lean winter months.