Four power utilities owe R29,930 cr as losses mount over 10 years
Uttar Pradesh is finally poised to hop on to the electricity reforms bandwagon.
The state cabinet on Thursday gave its formal approval for unleashing a slew of measures to bring a financial turnaround of the four ailing distribution companies (discoms) in the state, in line with the Centre?s financial restructuring package (FRP) scheme.
This now clears the way for the Uttar Pradesh Power Corporation (UPPC) to get the package ratified by the other major stakeholder in the state, the UP Electricity Regulatory Commission, before sending it to the Centre by next week.
It may be mentioned that to be part of the scheme, the state government had to agree to the strict pre-requisites laid down by the Centre, the last date for which is March 31.
The need for restructuring in UP comes in the backdrop of mounting losses in the state’s four power distribution utilities. As on March 31, 2012, the total dues were to the tune of R29,930 crore, which included bank loans of approximately R15,000 crore and an equal amount as outstanding power purchase liabilities. The losses of these discoms have accumulated over the last 10 years, essentially because of the losses from the gap between average revenue realisation (ARR) and the cost of supply.
Speaking to FE, SK Agarwal, director finance of UPPCL, said the present cash gap of the discoms, amounting to R13,686 crore, would be cleared off in the next four years and by the year 2017-18 the discoms are expected to get back into profit.
?The accumulated losses are to the tune of R29,930 crore. Half of the loan liabilities and outstanding power purchase liabilities as on March 31, 2012, (R14,965 crore) will be taken over by the government of UP and the cash gap between the cost of supply and ARR will be bridged in a maximum of five years,? Agarwal said, adding that the state government has also agreed to provide interest repayment to UPPCL till the bonds are issued by it.
The state government’s loans, amounting to R1,719 crore, will be converted into equity or repayment will be deferred. ?Also, all government department outstandings towards electricity bills will also be paid immediately and the subsidy for rural supply will be paid on the basis of meter readings of feeders, which will be verified by a third party,? he said.
Agarwal added that the scheme is a serious step to put the discoms back on rail. ?The losses are the accumulated sins of the last 10 years. Serious efforts are being made to commit processes and decisions which will compel the state to run the utilities in a professional manner and make them financially self sustainable. Distribution is the pillar of the power sector and transmission and generation are totally dependant on the distribution sector. Therefore, this entire exercise will make the power sector viable,? he said.
Among the pre-requisites of the FRP that the state government has given its approval for are regular revision of tariff and bringing down the AT&C losses.
?The discoms will have to bring down theAT&C losses from the current 41% to 17% by 2020-21,? said Sanjeev Mittal, chairman of UPPCL.
