The Hindu Business Line : NTPC arm plan to take over Mescom delayed

THE proposal of the NTPC Electricity Supply Company Ltd (NESCL) to assume control over the Mangalore circle in Karnataka has tripped for want of clearance from the State Cabinet.

Under the original proposal, the tentative date for NESCL to assume control over the Mangalore Electricity Supply Company (Mescom) was to have taken place in April itself. The proposal is subject to ratification by the State Cabinet. However, the State Cabinet is yet to take up the proposal, although the first deadline has long lapsed.

Karnataka's Principal Secretary (Energy), Mr Dilip Rau, said, "The State Government is still examining the NTPC proposal." But he said that the State Government is not averse to transferring the assets of Mescom to NESCL, in view of the track record of the public sector power major. Among the issues that would have to be resolved included some regulatory issues, he added.

The due diligence for NESCL had already been completed by SBICaps. NESCL is the distribution subsidiary of the power major National Thermal Power Corporation Ltd (NTPC). In the event of the transfer materialising, Mangalore would comprise the first circle under the power major's foray into electricity distribution.

The Karnataka State Government's policy allows transfer of equity control of up to 51 per cent to other investors, including domestic and foreign players. However, few private sector investors have evinced interest in the proposal.

This prompted the State Government to approach NESCL. In addition to Mescom, the State Government had also asked NESCL to take over the Chikmagalur and Shimoga circles. But NESCL has sought the de-linking of Mangalore from both Shimoga and Chikmagalur circles.

The sources said that the State Government has prepared to compensate some of the subsidies to the distribution company. These subsidies include losses incurred under supplies to Bhagya Jothi and Kutir Jothi Schemes (electricity supply to scheduled castes). But the State Government is not prepared to compensate commercial losses.

Currently, figures for Mangalore (submitted to the State Electricity Regulatory Commission) indicated that the gross electricity sales in the region was around 5,700 million units a year. At least 50 per cent of the supply was un-metered. This included at least 3.25 lakh irrigation pump sets with a specific consumption of about 4,993 units per pump set. The distribution loss, according to the data, was 22.25 per cent inclusive of extra high tension (EHT) load. Exclusive of the EHT consumption, the loss ratio, according to the data, was 25.25 per cent.

But it is not only NESCL's proposal that is stuck for want of State Cabinet clearance. The Nagarjuna group's proposal for setting up the 1000-MW Mangalore thermal project is also stuck, despite the precarious power situation in the State. The project is ready for wet financial closure. It has obtained all statutory clearances and is still awaiting State Cabinet's ratification of the revision in the power purchase agreement, which brings down the return on equity to 14 per cent on a plant load factor of 80 per cent.

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