SERC's projections for 2003-04 go awry

THIRUVANANTHAPURAM, APRIL 24. Had the Kerala State Electricity Board (KSEB) strictly adhered to spending authorised by the State Electricity Regulatory Commission (SERC) on power purchase last year, the result would have been a power cut of more than 40 per cent during the January, February and March 2004.

The SERC, while approving the KSEB's statement on its Aggregate Revenue Requirement (ARR) for 2003-04, had authorised the KSEB to purchase 7,491.24 million units of power costing Rs. 1,775.13 crores during the year.

In reality, however, the KSEB had to purchase 8,006.86 million units at a cost of Rs. 1,944.76 crores in 2003-04, according to the provisional figures compiled by the KSEB's finance wing. Since the SERC had issued this order only in December 2003, obeying it would have meant forced reduction in consumption of power to the tune of 515.62 million units during the quarter January-March 2004. In other words, the KSEB could have done it only by imposing a power cut to save 5.73 million units of energy daily.

"The average daily consumption of power, with the 30-minute load-shedding in force, is now in the range of 35 million units. Of this, 14 million units are drawn by industries. To save 5.73 million units, we would have thus been forced to impose a power cut of more than 40 per cent to industries," top KSEB officials said.

The officials as well as the KSEB Officers' Association, in the context of the SERC's order for 2004-05 released last week, had criticised the SERC for being `arbitrary' with its calculations. They had accused the SERC of being insensitive to the practical side of the functioning of the power sector.

The power sector is an extremely complex entity and the financial side of its operation in a State like Kerala is influenced by several factors such as rains, fluctuations in fuel price, scheduling of energy purchase from different sources that charge different rates and, above all, the need to ensure that the consumers find the supply dependable.

An organisation like the KSEB also has to cater to several social obligations. It has to lift the load- shedding during the time of public examinations, Government programmes such as pulse polio vaccination and all sorts of local and State-level festivals. And, irrespective of whether the bill is settled or not, it has to continue supplying power to farmers, lift irrigation schemes, water supply installations, hospitals and police stations. "We cannot take a clinically detached stand in these areas. Also, such gestures are part of the Government's policy," officials said.

The Central Electricity Act envisages the SERC as a mechanism to protect the interests of the consumers by ensuring efficiency in the functioning of a power utility like the KSEB. It is also the SERC's duty to ensure financial viability of the power utility.

A review of last year's ARR of the KSEB, the SERC's order on it and the actual financial performance of the KSEB (as per provisional data) shows that the SERC is yet to come into terms with the complexities of the power sector here. The result, unfortunately, is a clear setback for the KSEB.

The KSEB, in its ARR, had projected a revenue gap of Rs. 926.08 crores for 2003-04, while the provisional data now available show that it came to Rs. 990.58 crores. The real gap is thus Rs. 64.5 crores more than the gap projected in the ARR.

The SERC, however, slashed several expenses and overestimated the income of the KSEB to place the revenue gap at the level of Rs. 557.56 crores. The SERC also allowed this gap to be covered by asking the Government to give the KSEB a subsidy of Rs. 375 crores, in addition to allowing the KSEB to retain with it the electricity duty collected from the consumers (which has to be passed on to the Government in the normal course). The promised subsidy never materialised, because of the Government's financial difficulties.

The net result of the `wrong' projections of the SERC and the non-receipt of the Government subsidy is that the KSEB had to finish 2003-04 with a huge uncovered revenue gap. The uncovered gap for 2003-04 would come to nearly Rs. 800 crores (when a sum of around Rs. 200 crores collected as electricity duty and not passed on to the Government is deducted from the revenue gap of Rs. 990.58 crores mentioned in the provisional data).

"No one actually wants a tariff hike here. But, if we are talking about financial viability of the power utility, finishing a year with such a big revenue gap is just not on. It has to be bridged somehow or the other, maybe by getting the Government subsidy released. By slashing our realistic projections without sound logic, the SERC underplayed the difficulties of the KSEB in the eyes of the consumers and also the Government," KSEB officials said.

Recommended for you