APGENCO Headed For Bankruptcy

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New Delhi, Dec 12: : tariffs and not from APGENCO’s own resources. But instead of recovering these costs from retail consumer tariffs, APGENCO is servicing them through its depreciation provision and return on equity (ROE).

Incidentally, the state government did not allow depreciation and ROE for APGENCO for more than three years after reforms were initiated in 1999 as this would have resulted in an increase in tariffs. But even if these provisions have been allowed now, they are being utilised to service interest costs. According to experts, some of the measures are in violation of CERC’s guidelines and notifications and also go against the concepts of accounting practices.

When questioned on the issue of increase in tariffs, Dr Sarma contradicted the apprehension and said that capacity addition through APGENCO would be more cost effective for the state as even its new stations were cheaper than IPPs.

APGENCO, in its submission to the regulatory commission, points out that the government did not pay substantial amounts of subsidy due to APSEB, amounting to more than Rs 2,500 crore and instead opted for offsetting some loans for projects (amounting to Rs 1,400 crore) that are not even due for repayment.

APGENCO feels that if the state government had paid the subsidy after the transfer, the organisation would never have had to borrow through vidyut bonds to pay for its regular commercial obligations. APGENCO is now servicing these bonds through its depreciation provision as the state government is reluctant to allow these costs to be recovered through tariffs. The situation is the same when it comes to meeting servicing the interest costs on provident fund and pension bonds, which APGENCO is servicing out of its ROE as the these costs are not reflected in the retail tariffs. Interest costs on these two accounts alone are in the region of Rs 350-400 crore from FY 2003 to FY 2006.