Mantralaya sources told The Financial Express that the state government and MSEB will make a formal proposal for these funds during the ensuing visit here by the World Bank's country co-ordinator Joelle Chassard on June 19.

This will be MSEB's first demand after WB's decision to suspend a loan of Rs 750 crore during the previous Shiv Sena-BJP government.

The WB's decision had come in the wake of MSEB's failure to maintain a rate of return of 4.5 per cent. Following the suspension, the then government had to make up the shortfall through an equivalent amount of subsidy to the MSEB.

MSEB will utilise funds mainly for the installation of transformers, EHV lines, substations and repowering the existing network all over state. The previous Shiv Sena-BJP government had prepared a master plan with a investment of more than Rs 1,000 crore. However, it could not be implemented fully in view of the deteriorating financial conditions of the MSEB.

MSEB sources said that such an assistance was necessary for the flow of quality power to be generated by power stations run by MSEB and the independent power producers such as Enron, Reliance and Bhadravti. MSEB will have to go in for strengthening the transmission and distribution network mainly to reduce the losses from 31.2 per cent to 26 per cent as directed by the Maharashtra Energy Regulatory Commission (MERC).

It must be mentioned here that the MSEB had come under severe attack from the MERC and the consumer organisations for downplaying the T&D losses at 17 per cent. MERC at its maiden tariff order in April had categorically said that the cut in T&D losses would lead a saving of Rs 600 crore.

MSEB's financial position has become very precarious and the anticipated loss during 1999-00 is estimated at Rs 1,783 crore as against the profit of Rs 21 crore earned during 1998-99. The estimated loss works out to be minus 19.90 per cent for the previous fiscal. MSEB whose tariff hike proposal for 18.5 per cent has been turned down by the MERC, has been facing a cash shortfall of Rs 424 crore in the current month. The shortfall and the adverse cash position is likely to continue during the current fiscal. MSEB has yet to recover arrears amounting to Rs 3,775 crore from various categories of consumers till date.

Meanwhile, state chief minister Vilasrao Deshmukh accompanied by his cabinet colleagues and the officials will also discuss state finances, status report on the water supply and sanitation projects, forestry projects and the WB assisted Mumbai Urban Transport Project-II with the WB country coordinator.