?NTPC profiteering? bleeds UPPCL | india | Hindustan Times
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?NTPC profiteering? bleeds UPPCL

IF ITS representations to various bodies in Delhi are taken on face value, a funds-starved UP Power Corporation Ltd (UPPCL) seems to be paying through its nose for the electricity it purchases from the National Thermal Power Corporation. The NTPC not only recovers the full cost of power it supplies to the UPPCL, but also earns handsome return on its equity.

india Updated: May 29, 2006 01:12 IST

IF ITS representations to various bodies in Delhi are taken on face value, a funds-starved UP Power Corporation Ltd (UPPCL) seems to be paying through its nose for the electricity it purchases from the National Thermal Power Corporation. The NTPC not only recovers the full cost of power it supplies to the UPPCL, but also earns handsome return on its equity.

Since the power purchase cost is an important component of the electricity price that the UPPCL recovers from the consumers, it is ultimately the consumer who suffers from what the UPPCL says is ‘NTPC’s profiteering’. 

All public sector utilities in the country, including the UPPCL, purchase around 50 per cent or more power from the central generating stations, whose generation tariff is fixed by the Central Electricity Regulatory Commission (CERC). The last such fixation was done in  March  2004 and is valid for five years.

It has been the fundamental basis of generation tariff fixation that the generation utilities recover the full cost of generation and also earn a reasonable rate of return on their equity. Till March 31, 2004 the return on equity was 16 per cent, which has been lowered to 14 per cent now. 

Earlier, the generation utilities were entitled to the actual cost of operation, or normative, whichever was lower. But, now they are entitled to the recover cost on a normative basis. The normative is not based on past actuals, therefore, generation utilities, particularly the NTPC, is said be able to save a lot of money out of the expenses allowed to them. For example, they are allowed oil consumption at the rate of 2ml per unit, but their actual is 1 or 1.5 ml and they save the balance.

Similarly in operation and maintenance, they are making huge savings. These savings are virtually adding to the bottom line of the NTPC.
Ironically, however, the CERC has allowed the entire income tax on the core business as a pass through in the tariff. This has added to the woes of the UPPCL, like other distribution utilities. This, pointed out a senior UPPCL official, was the reason why the actual return on equity of the NTPC works out to more than 50% for most of the years. 

He said that the NTPC, being a public sector undertaking, was not supposed to indulge in this kind of profiteering. “When this issue is taken up at the level of the Power Ministry in Delhi, the reply normally given is that the NTPC needs a lot of funds for further investment. But this is not a strong argument in view of the fact that electricity is a necessity for every one, or rather a basic input for agriculture. The users cannot be saddled with exorbitant retail tariffs in view of our socio economic structure.”

He said the Ministry of Power needed to take urgent steps and issue directives to the CERC to reconsider the tariff norms according to the actual. This, he said, would bring down the tariff and give substantial relief not only to the consumers but also to the beleaguered distribution utilities. He said the matter would be pursued with full force at the CERC advisory committee meeting in Delhi tomorrow.