Mescom in the red, likely to make consumers see red too

Writes to KERC for a 66 paisa per unit hike to cover losses

With increasing power purchase costs and stagnating revenue growth, Mangalore Electricity Supply Company (Mescom) is staring at record losses this financial year. While this means higher power rates for consumers, for the 12-year-old Mescom, this would be only the second time – 2008-09 was the first – that it has faced losses.

Record losses

In a filing with the Karnataka Energy Regulatory Commission (KERC) last month, Mescom said its deficit (between expenses and revenue) is Rs. 340.52 crore. Though revenue deficit does not give the exact picture of losses, it was Rs. 111.41 crore last year — a record. “The losses are certain. We only have to find out if it unbearable,” said a Mescom official.

Mescom has written to the KERC for a tariff hike of 66 paisa per unit, while, also requesting the State government to offset losses. “If the government does not extend support, the hike needs to be Rs. 1.5 per unit hike for Mescom to break even,” said the officer.

With the election code of conduct in force, officials expect the hikes to be imposed in July after a series of public meetings. “Even then, four months of the next financial year (March to July) will see be severe losses,” said a source in Mescom.

Purchase costs up

A major chunk of Mescom’s finances goes in buying power, which officials say has increased 15 per cent annually. “Nearly 50 per cent of our power supply comes from thermal power plants where prices of imported and domestic coal is rising,” said an official.

By the end of January, Mescom spent Rs. 1,284 crore, with “warm months” of February and March leading to a consumption of “another Rs. 300 crore”, said officials. Last year, the company spent more than Rs. 200 crore in excess of the budgeted amount for power purchase.

With pending loans of Rs. 480 crore, unpaid government subsidy of Rs. 182 crore, and a staggering Rs. 1,000 crore yet to be paid to Karnataka Power Corporation Limited, Mescom’s balance sheets have been painted red.

Declining revenue

The KERC observed that Mescom was seeing low growth in domestic, commercial and industry connections, while there was a hike in subsidised irrigation pump-sets connections.

So while Mescom falls short by 266 million units of the target set for paying connections, it sees excess consumption of 144 million units for free connections this financial year.

“The overall growth rate of 4.66 per cent… is low when compared to normal growth of 8 per cent to 9.4 per cent,” the KERC notes.

Moreover, industry consumption has declined by 3.3 per cent. Mescom sources attributed this to slow industrialisation here, while many existing industries were instead buying power directly from generators. For instance, Campco buys from windmills in Chikkodi and Raichur.