CESC Ltd claims to be suffering a monthly cash loss of Rs 12 crore due to the West Bengal governments refusal to enhance the fuel surcharge to the proper level.
Against its claim to charge the consumer 60 paise a unit on account of fuel surcharge, the state government allowed a rate of 26 paise till March 31. This has recently been raised to 31 paise, although CESC is yet to issue the notification to its consumers.
The company has decided to switch over to poorer grade of coal to cut its fuel cost. This will however cause more tube leaks in the plants boiler and affect the output.
Having weighed the option of approaching a court of law, the company has decided to lie low for the moment and wait for better days. During the first three years after CESC came under RPG control in April 1989, it enjoyed a good rapport with the government. However, relations turned sour once Sankar Sen became the state minister for power in 1991.
The power utility has claimed that the state government has blocked recovery of nearly Rs 300 crore in fuel surcharge since 1993-94. The cash losses are being offset by raising loans. The company has been unable to pay on time for the power purchased from the West Bengal State Electricity Board, which provides about 40 per cent of the energy supplied by CESC in its licensed area.
The company has already issued internal circulars to cut costs at every step. Travelling expenditure and telephone bills of most officers are being controlled. However, it is difficult for the company to curb expenditure under most heads. The cost of power bought from the SEB and Damodar Valley Corp is estimated to form 35 per cent of the total expenditure of CESC, coal costs account for 30 per cent, interest charges 15 per cent and wages and administrative expenses 17 per cent. The remaining 3 per cent is miscellaneous expenditure.
Restrictions on use of telephones and travelling expenses could at best save Rs 3 crore, which would leave no impact on the companys financial health.
The fuel surcharge issue has now been referred to a one-man committee of Deb Kumar Bose, former SEB chairman and a statistician. Bose had earlier headed a three-member committee to consider a fuel surcharge fixed unilaterally by the company. The committees report lowered the increase by less than two paise.
The company believes that the fuel surcharge revision need not be cleared by the government. It is not challenging the government immediately.
The state government had earlier asked the company to gradually bring down the transmission and distribution losses to 14 per cent. But the have steadily gone up and touched 20 per cent in 1995-96. There was no improvement last year. The state government will allow the company to recover a maximum of 14 per cent line losses from its consumers.
Till the Bose committee considers the surcharge issue, CESC can continue to consider the current rates as provisional and show a substantial sum as receivable in its 1996-97 balance sheet to avoid a plunge into the red.
