MSEDCL to demerge agri consumers, plans listing to erase debt

The move is aimed at mopping up ₹75,000 crore in outstanding dues, ahead of a planned stock market listing

MUMBAI: State-run power company, Maharashtra State Electricity Distribution Company Ltd (MSEDCL), has initiated a demerger to set up a company exclusively for its agriculture consumers. The move is aimed at mopping up ₹75,000 crore in outstanding dues, ahead of a planned stock market listing.

This is the right time to start listing various state government undertakings, said chief minister Devendra Fadnavis (HT Photo)

With a consumer base of over 2.8 crore, MSEDCL serves electricity consumers in parts of Mumbai’s eastern suburbs, Thane, Navi Mumbai, Kalyan, Vasai-Virar and other parts of Maharashtra. But for over a decade, it’s been facing a financial crisis with rising debt and arrears from agricultural consumers, currently amounting to ₹98,000 crore.

Speaking at a function on the listing of bonds issued by the Nashik Municipal Corporation on Tuesday, chief minister Devendra Fadnavis, who also holds the energy portfolio, referred to plans to list MSEDCL and other power companies on the markets. “This is the right time to start listing various state government undertakings. We have decided to list our three power companies. MSEDCL is the largest distribution company in the country, and listing it will bring more efficiency and agility,” said Fadnavis.

MSEDCL hopes to form a separate company for its agricultural consumers in the next six months, confining arrears from these consumers to the new entity. Last year, the state government had announced free power to all agricultural consumers using agricultural pumps up to 7.5 horsepower capacity. As a result, the state owes MSEDCL around ₹20,000 crore per year, towards subsidies for agricultural power and free power. Still, over 2 lakh agricultural consumers, whose pumps are over 7.5 horsepower, have not paid dues of ₹2,000 crore per year.

“We have ₹ 75,000 crore in accumulated arrears from agricultural consumers. But we are facing an arrears issue, with a ₹2,000-crore annual increase. A demerger and separate company for agricultural consumers will help us clean up the balance sheet, which is important before listing.” said Lokesh Chandra, chairperson and managing director, MSEDCL.

He said that after segregating agricultural consumers, MSEDCL would be a utility with a large number of industrial, commercial and residential consumers, who pay their bills regularly. This would help list the company on the stock market.

At present, MSEDCL has debt of over ₹98,000 crore, with interest alone accounting for ₹12,000 crore. The company plans to use the capital raised after listing to clear its debt and strengthen the company.

“All the national power companies that are listed have been financially strengthened and given dividends to the central government. With the listing, we hope MSEDCL would be transformed into an asset for the state government,” said Chandra.