MSEB's novel plan for state to skirt MERC load

The Maharashtra State Electricity Board (MSEB) has suggested a way out for the Maharashtra government to offer free power to 23 lakh farmers in the state, without having to dip into its treasury.

The move comes a day after the Maharashtra Electricity Regulatory Commission (MERC) rejected the state's plan to effect a book adjustment with MSEB for Rs 411.62 crore on account of the deductions made by the Centre from its block loan towards dues owed by MSEB to certain central public sector undertakings (CPSUs). The order said the state would have to issue formal orders before effecting any such book adjustment with MSEB.

According to well-placed secretariat sources, the MSEB has suggested that the state make a cash payment of Rs 402 crore to it on account of the subsidy in power for agriculturists.

This amount, the official said, would then be returned in cash as a prepayment in part of the Rs 2,000 crore loan owed by the power utility to the state that is yet to mature.

This solution was offered by MSEB after the state finance department put its foot down and refused to finance the free power sop announced by the government for farmers.

The finance department held that since there was not budgetary provision made for the free power, the state government could not tap into the treasury for this purpose without violating the constitution of the country.

Earlier, the state government deducted Rs 411 crore from the MSEB's account after promising to convert this into a loan as agreed with by MSEB. This was not done.

On Thursday, the MERC order eliminated the book adjustment option, leaving the state at its wits end on how it could ensure that the MSEB raised zero bills to the 23 lakh agriculturists, without having to foot the bill for the power subsidy. The MSEB now hopes to issue zero energy bills to agricultural consumers from 1st July, 2004 to 30th September, 2004.

In its order issued late today MERC has stated that: "Unless the state firms up the quantum of these payments by issuing formal orders prior to electricity bills being issued to agricultural consumers, the scheme of book adjustment proposed by MSEB and the state cannot be made effective. The amounts that are not finalised as well as adjusted through such formal orders before that date cannot be taken into account while determining the net amount available for adjustment, and the state shall make cash payments to the extent of the consequent shortfall."

Has the government agreed to this? "They have to as there is no other solution," said the official.