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HindustanTimes Tue,02 Sep 2014

Power discoms want 60% hike in tariff

Avishek G Dastidar, Hindustan Times  New Delhi, May 04, 2011
First Published: 23:58 IST(4/5/2011) | Last Updated: 01:44 IST(5/5/2011)

The Capital's power distributors have served an ultimatum of sorts to the Delhi government, saying that their current cash reserves won't keep them in operation beyond this month and that they require an immediate 60% hike in power tariff.

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The discoms have sought a bailout of Rs. 500 crore from the government and are about to approach Power Finance Corporation and other fundingagencies. They have also asked banks to double their credit period to two months.

With the torrid summer days around, the timing of the ultimatum and the pressure is not lost on anyone.

Thanks to power tariff remaining constant for the past five years, the power regulator not truing up large parts of their capital investments and — as per discoms' statistics — the power purchase cost escalating around 196% in eight years, the companies claim that their accrued losses have created a revenue shortfall of around Rs. 9,000 crore, making the utilities unviable.

"No bank is willing to lend us anymore. We have already defaulted on payment to banks. Now we are on the verge of shutting shop if our demands are not met," Lalit Jalan, chief executive office of Anil Ambani-led Reliance Infra, which controls the BSES discoms, said on Wednesday.

"We are losing Rs. 5 crore every day, thanks to the tariff not being revised."http://www.hindustantimes.com/images/HTPopups/040511/05_05_11-metro-2.jpg

The discoms have also demanded an unprecedented "true-up note" from the Delhi Electricity Regulatory Commission (DERC). The note would as good as guarantee in writing that the DERC would true up Rs. 9,000 crore of "regulatory assets. The banks, discoms have argued, would give loans based on this note.

According to a "solution" offered by the companies to tide over the immediate crisis, they should be allowed to levy a variable fuel adjustment cost on power consumers.

This is the cost of the fuel needed to generate power — something power-generating stations charge the discoms on a monthly basis.

"As many as 17 states have this. This is part of uncontrollable costs of tariff. Power purchase cost alone constitutes 80% of the tariff," Jalan said.

Sources said the DERC is finalising the process of allowing this variable surcharge to be levied, and that typically it could be upwards of 20% of the power tariff. But officials said getting a true-up note from the regulator and Rs. 500-crore bailout money from the government was as good as impossible since they are unprecedented and out-of-turn demands.

The discom's supposedly precarious cash-reserve and the advent of the variable fuel adjustment cost in Delhi were first reported in the Hindustan Times last year.


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