BSES is set to incur losses of about Rs 210 crore to Rs 250 crore over the next three years after acquiring the new power distribution zones in Orissa.
Speaking to the Business Standard, BSES chairman R V Shahi said after taking over the three new distribution zones in Orissa, BSES expected to make losses of around Rs 70 crore annually over the next three years.
The loss is on account of the tariff structure that has been approved by the Orissa regulatory commission which allows companies to earn returns by reducing transmission and distribution loss to 32 per cent to 35 per cent.
For privatising distribution in Orissa, the state government had sold off the western, northern and southern zones to BSES, while the Central zone was awarded to the AES.
As none of the distribution companies can bring down their distribution losses to the level called for by the regulator, all these companies will have to incur losses during the initial period operations.
The companies will achieve the target transmission and distribution loss figure in phases over the next few years.
The transmission and distribution loss figures have been debated intensely by the regulator as well as the distribution companies.
Companies like BSES, after taking over the distribution zones, claimed that the actual transmission and distribution losses worked out to 49 per cent against the certified loss of 45 per cent at the time of bidding.
The Orissa power regulator had, however, claimed that the loss according to its assessment of the three zones was about 43 per cent.
A higher distribution loss figure would imply that the distribution companies would have to take on higher losses during the initial years until they achieved the target set by the power regulator.
A decomposition of the overall losses among individual zones indicates that the central zone had the highest loss of around 50 per cent_indicating billing for only 50 per cent of the population in the zone. The western zone, on the other hand_the only profit earning zone at the time of bidding_had an average billing of 61 per cent, indicating losses to the tune of 39 per cent.
Shahi said the regulator had turned down BSES' request to cross-subsidise between zones to enable it to meet its financial requirements.
BSES had last year made a request for a tariff structure that would enable it to make good the losses arising in one zone or company with the returns it made through its other company or zone.
After taking over the three distribution companies in Orissa, Shahi said BSES was on a major drive to install meters. He also said the company expected around 700,000 meters to be added in the three zones as around 70 per cent of the consumer base in the zones were without meters.
