The gap between reasonable returns and clear profits earned by the RPG group power utility CESC Ltd is being pegged at a hefty Rs 200 crore for the year 1997-98. This means CESC's profits are woefully short of what is permissible by law yet again.
Under the Electricity Act, a power utility's clear profits (CP) can equal but not exceed its reasonable returns (RR).The situation is expected to be similar for 1996-97, as audit firm S R Batliboi goes into the details for the two years. A detailed report prepared by Batliboi for the period 1993-94 to 1995-96 has found CESC's CP to be far short of RR, against the state power department's claim that the company made excess profits.
As the CESC board meets to finalise its annual accounts on June 12, there is a distinct possibility of a three-figure net loss of around Rs 100 crore. CESC ran up a first half loss of Rs 29 crore.
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"For 1997-98 alone, the CP is a negative of over Rs 100 crore, let alone the RR. The gap between the two is in the region of Rs 200 crore," sources said.
Among reasons which are being put forward for the dismal situation at the company are the 2 per cent effective tariff increase after several months, which came in November 1996. The net increase, CESC had claimed, was highly inadequate for the company. A tariff revision is therefore urgently being sought by CESC.
Besides, with the fuel surcharge arrears (FSA) issue hanging on for the two other years, 1996-97 and 1997-98, and the current fuel surcharge rate unresolved, the monthly cash losses to the tune of Rs 13 crore continues. This has added to the company's woes. Despite a clear signal from the Batliboi and D K Bose reports that CESC was right in the FSA dispute with the government, the current fuel surcharge rate is still to be revised, despite CESC actively lobbying with the Jyoti Basu government for it.
However, a counter view from corporate circles and CESC-watchers tends to put the blame for the company's position on the top management of the power utility. There is also a view that the company needs to be more transparent in terms of its day-to-day operations of power generation and distribution, particularly in view of the growing power shortages once again in the sweltering heat of Calcutta's summer.
The cost of financing the fuel surcharge arrears is also expected to take a heavy toll on the company's bottomline for 1997-98. "The situation, put simply, is bleak," sources said, commenting on the outlook for 1998-99.