The highly indebted and loss-making Uttar Pradesh Power Corporation has written to the ministry of power requesting fresh loans of Rs 5,000 crore for the current fiscal and a similar amount for FY17.
“Since banks are not providing any funds to discoms, cash management has become a big problem,” chairman of UPPCL Sanjay Agarwal has written, also outlining a viability plan for the corporation.
The letter says UP discoms are saddled with loans of about Rs 41,000 crore, including Rs 15,840 crore of the balance of loans outstanding as on March 31, 2012. “The interest payout on these loans is about Rs 5,500 crore. This means that out of the operational loss, almost 50% is contributed by the interest alone. This has increased the COS by about 60 paisa per unit,” the letter notes.
The UP government has said that since the discoms are still in losses, paying interest and principal has become difficult. However, the moratorium for loans outstanding on March 31, 2012, and also the loans taken in 2012-13 is over and the repayment of principal has started. With banks recovering their interest and principal repayment from the escrow account, discoms are left with little cash to pay for power purchase and meet their other expenses, the letter notes.
As per the earlier FRP, after FY15, the entire operational loss of discoms is to be funded by the state , but the state government’s finances are already under stress due to taking over of past short-term liabilities and also the funding of operational losses in the last three years.
The letter goes on to add that in UP there are about 65 lakh rural consumers, who are mostly unmetered. “It is difficult to control AT&C losses in rural area in the absence of meters. Rural metering has been started but it would take at least two years to cover the entire state. The state government is providing subsidy for rural supply at reduced rates but in the absence of accurate data of consumption in rural areas, the subsidy is based on estimates and does not cover the actual loss to discoms,” it says, adding that while the discoms have been regularly filing tariff petitions and ARR since FY13 and have been asking for increase in tariff to bridge the gap between COS and ARR, the UPERC, unfortunately, has not allowed adequate tariff increase in the last two years.
“Since the tariff orders were also issued quite late, the effective increase for the year became negligible. The true ups were filed up to 2012-13 and regulatory assets of about Rs 18,000 crore were accepted but the regulatory surcharge allowed is so low that the regulatory assets would be recovered over a period of 15-18 years,” it adds.
Giving specific proposals to help rectify the situation, the letter says that liquidation of loan liabilities is the major necessity.
Apart from this, the letter underlines issues such as admissibility of incentive on reduction of AT&C losses, interest subsidy on loans taken for meeting operational losses, regulatory issues, etc., and in the end seeks immediate financial help. Confirming that a letter has been dispatched to the Centre, a senior official of UPPCL told FE that while the Centre formulated the FRP in October 2012, it became operational in July 2013 and the period of FRP ended in March 2015. “So the discoms virtually got less than two years’ time to eliminate losses,” he said.
“Since banks are not providing any funds to discoms, cash management has become a big problem,” chairman of UPPCL Sanjay Agarwal has written, also outlining a viability plan for the corporation.
The letter says UP discoms are saddled with loans of about Rs 41,000 crore, including Rs 15,840 crore of the balance of loans outstanding as on March 31, 2012. “The interest payout on these loans is about Rs 5,500 crore. This means that out of the operational loss, almost 50% is contributed by the interest alone. This has increased the COS by about 60 paisa per unit,” the letter notes.
The UP government has said that since the discoms are still in losses, paying interest and principal has become difficult. However, the moratorium for loans outstanding on March 31, 2012, and also the loans taken in 2012-13 is over and the repayment of principal has started. With banks recovering their interest and principal repayment from the escrow account, discoms are left with little cash to pay for power purchase and meet their other expenses, the letter notes.
As per the earlier FRP, after FY15, the entire operational loss of discoms is to be funded by the state , but the state government’s finances are already under stress due to taking over of past short-term liabilities and also the funding of operational losses in the last three years.
The letter goes on to add that in UP there are about 65 lakh rural consumers, who are mostly unmetered. “It is difficult to control AT&C losses in rural area in the absence of meters. Rural metering has been started but it would take at least two years to cover the entire state. The state government is providing subsidy for rural supply at reduced rates but in the absence of accurate data of consumption in rural areas, the subsidy is based on estimates and does not cover the actual loss to discoms,” it says, adding that while the discoms have been regularly filing tariff petitions and ARR since FY13 and have been asking for increase in tariff to bridge the gap between COS and ARR, the UPERC, unfortunately, has not allowed adequate tariff increase in the last two years.
“Since the tariff orders were also issued quite late, the effective increase for the year became negligible. The true ups were filed up to 2012-13 and regulatory assets of about Rs 18,000 crore were accepted but the regulatory surcharge allowed is so low that the regulatory assets would be recovered over a period of 15-18 years,” it adds.
Giving specific proposals to help rectify the situation, the letter says that liquidation of loan liabilities is the major necessity.
Apart from this, the letter underlines issues such as admissibility of incentive on reduction of AT&C losses, interest subsidy on loans taken for meeting operational losses, regulatory issues, etc., and in the end seeks immediate financial help. Confirming that a letter has been dispatched to the Centre, a senior official of UPPCL told FE that while the Centre formulated the FRP in October 2012, it became operational in July 2013 and the period of FRP ended in March 2015. “So the discoms virtually got less than two years’ time to eliminate losses,” he said.
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