Power distributor MSEDCL has made it clear to Maharashtra Electricity Regulatory Commission (MERC) it was not in a position to implement mechanisms like open access and parallel licensing as it was facing a huge deficit of Rs 3,800 crore. The obligation to purchase renewable energy was also drilling a hole in its pocket.
In a submission to the Commission, the distributor stated it had accumulated this deficit in the last five years. This deficit had increased the working capital requirement. MSEDCL has blamed the Commission for the difficult financial scenario claiming that lower tariff, delayed tariff orders and unrecovered revenue gaps of earlier years were the major reasons. It stressed that unless there was full recovery of costs and return on equity (RoE), support will be required from state government for carrying out operations.
The distributor, however, has arrears of over Rs 12,000 crore. Most of the defaulting consumers are farmers. Farmers' cooperative society Mula Pravara alone owes another Rs 2,200 crore. MSEDCL is unable to recover the dues from them due to political pressure. In fact, agricultural arrears continue to increase in spite of efforts by the company.
The distributor has stressed that opening of power sector had put its survival at a risk. Industries, which are subsidizing consumers, can buy power from private players thus depriving MSEDCL of much needed revenue. If a large number of industries go for open access, it will be left with a large number of subsidized consumers with nobody to bear their burden.
The distributor also faces threat from Essar, which has applied for a parallel licence in Mumbai areas served by MSEDCL. Mumbai consumers are mostly subsidizing ones and their loss will dent the finances of the company. The distributor is also facing problems due to compulsion to purchase renewable energy - solar, wind etc. Renewable energy is far costlier than the conventional ones. While the power purchase cost goes up, the revenue realization does not increase much due to losses and limitations in increasing tariff of poor consumers and farmers. National Action Plan of Climate Change (NAPCC) had set a quota of 5% for 2009-10. This increases by 1% each year for the next ten years. Thus the target for 2013-14 is 9%.
In order to ensure the distribution companies meet the target, NAPCC has mandated that in case of failure, the violator has to pay regulatory charges that are equivalent to the highest applicable tariff during the year. MERC has taken a lead in promoting wind energy but MSEDCL strongly opposes it as cost is high and supply not assured.
Source- Times of India