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Barely six weeks after the Maharashtra government cut consumer tariffs by INR 8,400 crore — of which INR 7,200 crore was to be paid by the government — the Maharashtra Electricity Regulatory Commission (MERC) nullified two thirds of it by giving a INR 5,022-crore interim relief to Maharashtra State Electricity Distribution Company Limited, or Mahavitaran, in view of the “extraordinary financial difficulties being faced due to abnormal change in sales mix of subsidising categories of consumers and to maintain its financial viability”. The order raises tariff across consumer categories between 11 Percent and 12 Percent. The state regulator said the amount will be recovered over a period of 12 months and will be in effect for bills issued from March 1.

“MSEDCL is currently in a very critical financial situation. MSEDCL’s financial condition is so precarious that it does not have sufficient funds even to discharge its liabilities towards power procurement. It has already defaulted in making payment to MSPGCL and other generation companies and current accumulated liabilities are considerably high,” Mahavitaran said while laying forth its arguments for immediate relief.

The regulatory assets for Mahavitaran are INR 7,800 crore. While the order allows it a carrying cost of INR 1,317 crore – or INR 1.54 per unit – the order does not offer a path to discharging the assets as has been done for R Infra, Tata Power and BEST. The state-owned company also said that if tariff is not revised at an early stage then it may default in loan repayment, which in turn will affect its credit rating.

This is despite MERC allowing Mahavitaran to recover INR 5,432 crore related to payments towards MahaGenCo and transmission charges arising out of operations in the years FY10, FY11, FY12 and FY13 in orders dated Sept 3, 4 and 5, 2013. As of 31.12.2013, Mahavitaran has a total debt of INR 4,245 crore, consisting of overdraft of INR 1,745 crore and short-term loans of INR 2,500 crore.

MERC observed that the revenue gap was mainly due to shortfall in actual revenue billed, a concurrent effect of shortfall in energy sales. For example in FY13, Mahavitaran had actual sales of 85,218 MU as against the approved sales of 89,556 Mus. This resulted in actual sales of INR 44,280 crore as compared ith the approved number of INR 50,408 crore. While sales fell in almost every category of consumers, the most significant impact was witnessed in the sales of industrial category, which grew by only 1 Percent against the projection of 14 Percent and 9 Percent for high tension (HT) and low tension (LT) category respectively.

“On top of this the drought situation in various regions of Maharashtra in FY 2012-13 resulted in the sales witnessing a further downfall of 4 Percent. Also migration of subsidising consumers through open access impacted sales growth materially,” MERC said in its order.

Source-On Request