The West Bengal state government's reluctance to increase power tariffs may be a politically-motivated move beneficial for consumers, but it may bring the West Bengal State Electricity Distribution Company (WBSEDCL) back into the red in the next financial year.
The state power distribution company saw a turnaround, from losses of Rs 383 crore in 2004-05 to a profit of about Rs 96 crore in 2009-10. Now, with no revision in tariffs, the state utility is likely to see a revenue loss of about Rs 2,500 crore in 2011-12. It has also posted a drop in its half-yearly net profit at Rs 22.02 crore this financial year, compared with a loss of Rs 69.19 crore in the year-ago period.
Despite approval from the state regulator, the West Bengal Electricity Regulatory Commission (WBERC), for a tariff hike this financial year, the new government led by Mamata Banerjee reversed the decision, leaving distribution companies in lurch, though the discom has been collecting Rs 4.27 per unit — the 2009-10 tariff. This amounts to under recoveries of Rs 1.33 per unit, resulting in a revenue loss of Rs 2,500 crore for 2011-12, against the power ministry's projected sales of 19,000 million units. If allowed, the average tariff would stand at around Rs 5.60 per unit.
A senior WBSEDCL official said, “We have requested the government for a subsidy or benefits like adjustments in the form of waiver of state cess, electricity duty and interests, for certain loans the utilities have taken from the state government. It would amount to about Rs 1,500 crore. Even after that, the revenue loss would stand at around Rs 1,200 crore.”
In 2010-11, the discom had revenues of Rs 9,933.30 crore, and Rs 8,079.78 crore in 2009-10, according to figures on the WBSEDCL website.
Due to the increased cost of coal, the regulator had allowed WBSEDCL and the Durgapur Power Project (DPL) to hike tariffs by an average of Rs 0.38 per unit and private company CESC by Rs 0.46 per unit, with effect from April. Though CESC is still charging the hiked tariff, it is under immense pressure to roll it back.
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The regulator had come with a plan for the period between 2011-12 and 2013-14, which allowed automatic pass-through of fuel and power purchase costs on the basis of a formula to be implemented from April, on a monthly basis, a senior power ministry official told Business Standard.
However, the new government did not allow government discoms to raise the tariff and instead, asked the company not to file a tariff revision petition for 2011-12, the official added.
WBSEDCL chairman and managing director, Rajesh Pandey, said, “We are charging Rs 4.27 per unit. Though it was raised by 38 paise early this year, the firm was unable to charge it due to certain technical difficulties and the government's policy of not going ahead with it.”
Across the country, discoms face an alarming situation, since their cumulative losses stood at over Rs 1 lakh crore last year, besides outstanding loans of Rs 177,602 crore as on March 31, 2010. The financials of power distribution companies is gloomy, as these are not able to recover costs of operation, owing to a mismatch in costs and tariffs. There has been no substantial increase in power tariffs in the last five or six years.