The Hindu Business Line : KSEB allowed to hold on to current tariffs this fiscal

THE Kerala State Electricity Regulatory Commission (KSERC) has approved a Kerala State Electricity Board (KSEB) request for maintaining existing tariffs and other charges for the remainder of year 2003-04.

Briefing newspersons on directives on aggregate revenue requirements (ARR) and expected revenue from charges (ERC) for KSEB for 2003-04, Mr M.G.K. Pillai, Chairman, and Mr C. Balakrishnan, Member, said the commission strongly recommended that the State Government release subsidy of Rs 375 crore to KSEB in monthly instalments and grant permission for retaining duty amounting to Rs 182.56 crore.

It also gave a qualified approval to a KSEB proposal for "truing up" costs and revenues at the end of the financial year and adjustment of fuel and other costs as a separate application.

In turn, the board was asked to carry out truing up of all items of expenditure and revenue receipts. The board would also be required to furnish, from time to time, full details in respect of each item along with supporting data as is called for by the commission.

Earlier, the commission approved an ARR of Rs 3,697.83 crore and a total ERC of Rs 3,141.37 crore against the Rs 3,850.31 crore and Rs 2,924.23 crore respectively projected by KSEB for 2003-04.

The revenue gap of Rs 556.46 crore thereon would be met from concessions and subsidy from the State Government. This comprised release of Rs 175 crore in cash by way of subsidy provided in the State Budget and grant of additional subsidy of Rs 200 crore.

Borrowings and debt servicing: The commission noted with concern the "ever increasing" debt burden of KSEB. The total debt as on October 31, 2003, was Rs 5,043 crore against net fixed asset strength of Rs 6,000 crore, including work in progress.

The board was not exercising requisite diligence in its financial operations, especially in availing loans. The commission found it difficult to justify borrowings of Rs 1,002 crore up to October 31, 2003, at interest rates ranging from 10 per cent to 13.5 per cent.

It expressed serious reservations about swapping of loans, which accounted for a gain of Rs 7.15 crore per annum. The need to provide for items such as interest on cash credit for working capital and cost of raising finances bared total lack of financial planning. The commission wanted the board to prepare and submit a white paper on debt servicing, latest by January 31, 2004, to the State Government, the State Panning Board, apart from itself.

Capital works: The KSEB has proposed a base level investment of Rs 500 crore for capital works during 2003-04. However, this is not supported by any work programme, the commission said.

The information furnished merely indicates target dates and the financial progress in items of expenditure up to October 31, 2003. The board did not seem to have any system of project monitoring and control as a result of which budgetary control became the casualty.

It would appear that loans taken for capital projects remained unutilised leading to financial loss to the board.

The must immediately institute a system for project management, monitoring and control so that cost and time overruns on capital costs are totally avoided.

The commission warned it would be constrained to disallow interest on loans remaining unutilised or misappropriated.

The commission also wanted the board to submit a detailed investment plan for capital works during 2004-05.