Financial Daily from THE HINDU group of publications
Tuesday, May 04, 2004
Industry & Economy
Higher subsidy bills despite power tariff hike in Karnataka
Bangalore , May 3
POWER tariffs in Karnataka have escalated by an average of 35 per cent during the last five years, though this has not resulted in any reduction in the fiscal burden on the State.
Power tariffs between 1998 and 1999 have escalated from an average of Rs 2.05 a unit to Rs 2.77 a unit. The State Government's figures, however, indicate that this increase have not resulted in reducing the subsidy burden.
On the contrary, the subsidy has escalated by a whopping 232 per cent during the period. This is assuming that the support for the power sector this year is held at Rs 2,065 crore as estimated for the current year.
Sources said that power subsidies now accounted for almost 2 per cent of the gross state domestic product (GSDP), almost equal to the entire revenue deficit. Power subsidies were the major reasons for the State's inability to achieve fiscal correction, which accounted for less than one per cent of GSDP five years ago.
Sources said one of the major reasons for the escalation in the subsidy bill was that the State-owned utilities have been unable to improve their realisations and curtail their expenditure. The gross expenditure of Karnataka Power Transmission Corporation Ltd (KPTCL) in 1998-99 was Rs 3,746 crore, of which the cost of power purchase alone was about Rs 2,068 crore.
However, this expenditure for the current year is estimated at Rs 7,155 crore, inclusive of the 3 per cent return on net fixed assets. Power purchase costs alone are estimated at Rs 5,942 crore for all the four electricity supply companies, created by unbundling of KPTCL into distribution and transmission entities. But these figures are arrived at by estimating that hydel availability would improve this year against the last two-year period. The new costs are also inclusive of a transmission margin of 18 per cent.
Despite the concomitant increase in revenue receipts during the period, the deficit between expenditure and revenues have mounted. In 1998-99, KPTCL had shown a revenue surplus of Rs 66.87 crore, whereas for the current year the projected deficit is Rs 1,449 crore.
Sources said that the major reason for this discrepancy was projection of transmission and distribution losses, which were deliberately kept low at 18 per cent in 1998-99. These low levels of losses were partly concealed in the past by inflating the agricultural load in the State.
At present, the estimates of losses are equivalent to about 35 per cent though for tariff purposes, the allowance is only 28 per cent. The losses are partly on account of the large number of unmetered connections in the State (3,73,250 numbers out of 8,78,813 number installations yet to be metered).
These high T&D losses translate into a revenue loss equivalent to about Rs 2,500 crore every year, which is more than the projected revenue deficit for the State in this year's budget.
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