REL gets relief from Orissa power body

In a major reprieve to three Reliance Energy (REL) managed distribution companies (Distcos) in the state, the Orissa Electricity Regulatory Commission (OERC) has allowed them to securitize their outstanding dues payable to Grid Corporation (Gridco) at zero per cent interest.

This is expected to benefit the Distcos to the tune of Rs 863 crore towards delayed payment surcharge (DPS) claimed on them by Gridco.

In yet another sop to the Distcos, the commission has allowed them to pay back the outstanding dues to Gridco and back-to-back loan repayment liabilities at easy monthly installments over a period of 10 years.

The commission order is in response to the petitions filed by Gridco and the state government seeking clarification on recovery of outstanding dues from Distcos towards bulk supply tariff (BST) and loan repayment liability.

While demanding securitization of dues, Gridco, as per the standing norms, had claimed delayed payment surcharge on the Distcos at the rate of 1.25 per cent per month (15 per cent per annum).

The OERC in its order, however, observed that this interest has been allowed by the commission from time to time to be recovered through BST tariff of Gridco.

"Therefore, the commission can not permit payment of interest again on the same dues to be recovered from Distcos. This will mean passing the interest burden twice to the consumers, once through BST and again through retail supply tariff (RST)," the order said.

It concluded that the securitization of BST outstanding dues to Gridco payable by individual Distcos would be at zero per cent interest rate.

Similarly, the commission has allowed the Distcos to repay their outstanding loan liability including interest along with the securitized BST dues as on March 31, 2005 in 120 monthly installments starting 2006-07. The total amount payable by the three REL Distcos towards this works out to Rs 1,100 crore.

While making these payments, the Distcos, however, shall continue to pay the monthly BST dues to Gridco regularly through LC as per the bulk supply arrangement. "In case of default of monthly dues by Distcos they shall be liable to pay the delayed payment surcharge at the rate of 1.25 per cent per month," the order said.

The commission order coincided with the visit of chairman of Anil Dhirubhai Ambani Group (ADAG), the owner of REL, to Orissa.

Asked on the default by three REL owned power distribution companies in Orissa in payment of dues to Gridco and the state government to the tune of Rs 2m000 crore, Ambani said he had fruitful and wide ranging talks with the chief minister on the issue.

"There are regulatory orders in place. We will follow the regulatory process and find time bound solution to the issues."

Both the chief minister Patnaik and Ambani informed that a joint task force would be set up soon with representatives from REL and the government to resolve the dispute over REL distribution companies' payment default.