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State power company fears bankruptcy

The state government will have to make a strong case before the state electricity regulator to save its power distribution company, Mahavitaran.

mumbai Updated: May 17, 2011 01:20 IST
Dharmendra Jore

The state government will have to make a strong case before the state electricity regulator to save its power distribution company, Mahavitaran.

The power firm fears bankruptcy because its big users want to shift to other power firms without paying a cross-subsidy surcharge (CSS).

A distribution company’s business model requires the big consumers to cross-subsidise their smaller counterparts.

Otherwise, when bulk consumers migrate, the company is forced to raise the power tariff for the smaller consumers, often the layperson.

The Maharashtra Electricity Regulatory Commission (MERC) has started granting open access, under which any bulk user can directly buy power from any generator across the country after paying wheeling charges (carrying fees) to the respective utilities for using their networks.

The commission has already granted open access to the Nagpur-based Indo Rama Industries.

In Maharashtra, open access applications for more than 500 mega watts are now pending before the MERC.

In the case of Mahavitaran, among its 1.8 crore consumers, it has a large number of domestic consumers and users below the poverty line.

These consumers pay less for their electricity because they are cross-subsidised by high-paying industrial and commercial users.

Mahavitaran has been strongly opposing open access ever since the MERC granted its first approval.

It has also demanded that the MERC allow them to collect a hefty CSS from the migrants so that it can use the money to cross-subsidise smaller consumers.

“It is not long before the country’s biggest power distribution company faces a lockout,” a senior Mahavitaran official told the Hindustan Times, requesting anonymity, because he is not authorised to speak to the media.

Mahavitaran’s argument to the commission is that it’s a state-run social enterprise that does not make enormous profits, but ensure that all sections of the society get power.

The state-run firm fears it will go the way of the Punjab state company, if open access is allowed.

The Punjab firm has asked its regulator to increase wheeling charges by 180% because with no CSS, its annual loss has touched Rs 500 crore.

The MERC will conduct a public hearing on the issue on May 31.

For the first time, it has asked the state’s chief secretary and energy secretary to share their opinions at the hearing.