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Home News Power Sector News Nagpur franchisee Spanco issued termination notice by MSEDCL

Nagpur franchisee Spanco issued termination notice by MSEDCL

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SpancoThe Nagpur city  power franchisee is finally in the dock for not paying crores to MSEDCL against purchase of electricity. The franchisee has three weeks to pay Rs200 crore or else face action. MSEDCL has issued a preliminary termination notice for critical event of default. As per the distribution franchisee agreement, the critical event of default has occurred because of persistent failure of Spanco to pay the entire MSEDCL weekly bills. When the notice was drafted on June 22, the arrears stood at Rs202 crore. On July 4, it reached Rs225 crore. The notice was issued to Spanco on June 26 and MSEDCL has given it a month's time to pay up.

Spanco has admitted to receiving the notice. A top official said that the company was making all the efforts to pay up the bill. "We assure that the dues will be cleared, but we can't give a date today. The notice is only over dues and MSEDCL is happy over performance. Since January, 90% of our bill collection is escrowed, so there is no question of increase in dues."

Spanco had not paid MSEDCL the entire bill amount right from the beginning. It had taken over on May 1, last year. The bill for April 11 - around Rs45 crore - was collected in May. MSEDCL allowed Spanco to keep this amount as a three-month loan. Since then, the dues kept on increasing.

TOI had exposed last year that the power franchisee was paying the entire bill collection amount to MSEDCL. There was a huge gap between the total collection and payment made to MSEDCL. Spanco authorities were unable to explain where this money had gone. Finally, MSEDCL opened an escrow account in January whereby 90% of the bill collection amount of Spanco was directly deposited.

According to Spanco, it has not been able to pay MSEDCL's dues because the loans sanctioned by a consortium of public sector banks had not been disbursed. Secondly, Rs80 crore investment by US-based equity firm Bessemen Venture Partners (BVP) is stuck up due clearance from Reserve Bank of India ( RBI).

Apparently, MSEDCL has decided to act tough as recently it has imposed a heavy surcharge on consumers. The public hearings for power tariff for 2012-13 will start next week. Unless the distributor had taken action against Spanco, it would have faced difficulties regarding partial default by franchisees.

Source- TOI

 

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