Grim election year for UP power utility

The UP Power Corporation is facing a financial crisis as it prepares to file the annual revenue requirement (ARR) before the UP electricity regulatory commission on February 28.

As the Assembly election will take place next winter, the state government is in no mood to allow the power utility to revise tariffs. And without that, the utility is finding it impossible to manage its finances. Power tariffs have not been revised in UP in the last two fiscals.

The utility will file the detailed tariff proposals separately. According to the director (finance) of the UPPCL, S K Agarwal, the ARR is expected to show a deficit of Rs 2,500 crore.

In the current fiscal, the deficit is estimated to be Rs 2,300 crore. This deficit does not include the loan of Rs 1,400 crore from the Power Finance Corporation and the Rs 1,000 crore from the market. Justifying the rise in deficit, Agarwal said demand for power was expected to grow at more than 8 per cent in the next fiscal and so the deficit would grow while financing the additional purchase of power from outside the state. The power requirement in 2006-07 is likely to rise by 3,000 million units to 48,000 million units.

Official sources at the power utility, however, say the deficit of Rs 2,500 crore was on the lower side and it was bound to go up as the the UPPCL was asked by the state government to ensure a 14-hour power supply to rural areas. Power bought at Rs 6.50-7.00 per unit is supplied to the farm sector at 50 paise per unit.

The state government has, meanwhile, constituted a committee of power, finance and planning department officials to work out tariff proposals to be filed before the regulator. The remit of the committee is to find "soft alternatives" for covering the deficit of Rs 2,500 crore, shown in the ARR. The alternatives include reducing transmission and distribution losses, curbing theft, and improving efficiency.

The UPPCL has drawn up plans for buying power from outside the state to fill the over 3,000 Mw peak hour gap between demand and supply during the summer. But a huge power purchase bill will further aggravate the already grim financial position of the power utility. In 2005, the UPPCL had bought power for Rs 3,600 crore, but still the district headquarters reeled under power cuts for 10 to 18 hours daily.

The state buys 2,500-3,000 Mw from the central sector, which will be enhanced to 3,500-4,000 Mw, according to official sources.

Meanwhile, the state government has drawn up plans for adding 1,000 Mw by putting up new units at the existing thermal plants. However, none will be commissioned before the end of 2009.

The Power Finance Corporation of India has agreed to fund the expansion project of the Pariccha and Harduaganj thermal power stations, located in Jhansi and Aligarh, respectively, thus adding a fresh capacity of 1,000 Mw. The PFC has consented to give Rs 2,660 crore to the UP Thermal Power Generation Corporation's expansion project.