PSERC disallows book adjustment of govt subsidy to PSPCL | chandigarh | Hindustan Times
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PSERC disallows book adjustment of govt subsidy to PSPCL

chandigarh Updated: Jan 21, 2014 23:21 IST
Vishal Rambani
Vishal Rambani
Hindustan Times
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In a jolt to the cash-strapped Punjab government, the Punjab State Electricity Regulatory Commission (PSERC) has directed it not to make any adjustment of return on equity (RoE) against the subsidy to be given to the Punjab State power Corporation Limited (PSPCL).

Not only this, the power regulator in its order has said the Punjab government move is in violation of the Electricity Act, 2003.

The state government has to pay about Rs 4,800 crore to the PSPCL in lieu of subsidy for giving free power to agriculture sector and weaker section. However, instead of paying subsidy in cash, the Punjab government was indulging in the practice of making book adjustments of the subsidy. In last fiscal, it had adjusted Rs 942 crore as return on equity from the PSPCL.

The PSERC gave the order while disposing of a petition filed by retired engineer Gurnek Singh Brar, who has objected to the government's move to make book adjustments of subsidy amount though the power regulator had clearly directed the government to always pay subsidy in cash.

The petitioner had submitted that the state government in March 2013 had revised payable subsidy to the PSPCL for 2012-13 wherein the return of equity amounting to Rs 405.73 crore was to be adjusted against subsidy payable to the PSPCL. The PSERC had included enhanced return on equity amounting to `942.62 crore in its tariff order for 2013-14.

Since the Punjab government has not raised the issue of adjustment of return on equity against subsidy before the commission at all during the tariff determination exercise for 2013-14, the former's present proposal is in complete contradiction.

The petitioner had brought to light some adverse effects on the working of the PSPCL if return on equity is adjusted against the subsidy. The PSPCL submitted that adjustment of return on equity against subsidy by the Punjab government is not in line with the provisions of the Companies Act. Moreover, the PSPCL is not a profit-making company.

The Punjab government sought a number of adjournments but did not submit any reply. Thus the power regulator passed ex-parte orders considering the views raised by the petitioner.

"The commission in its earlier orders had made it abundantly clear that subsidy has to be paid in advance to the utility and no adjustment of alleged payment of RoE from the PSPCL is permissible under the provisions of the Electricity Act," it said.

The state government's proposal of March 28, 2013, to adjust RoE against subsidy for 2012-13 is not in accordance with the Electricity Act, thus the government should not make any adjustment of subsidy, said the PSERC judgment.