CESC Ltd exploring the possibility of a tariff hike in the wake of rising costs

Kolkata-based power utility CESC Ltd is exploring the possibility of a tariff hike in the wake of rising costs. The company may also explore inorganic growth possibilities as and when an opportunity arises. According to CESC Chairman, Sanjiv Goenka, costs have been increasing steadily due to the rise in input prices.

“There is a challenge in terms of cost as input prices are increasing and it is always a struggle. We have issues with costs which are beyond our control and at some point in time they will be reflected,” Goenka said at the 44th annual general meeting held virtually on Friday.

The rapidly rising cost of fuel — recently brought about by the Russia-Ukraine conflict and also on account of longer-term demand-supply factors, was a short-to-medium-term constraint, Goenka highlighted in the company’s latest annual report (2021-22). In such a scenario, power producers and distributors must be able to expeditiously pass on purely the element of higher fuel cost through tariffs.

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“Unfortunately, while this forms a part of each power supply contract, we still see the reluctance of State governments and regulators to give their assent in a timely manner. This, in turn, negatively affects the financial results of power producers. I hope we will see considerably less of this reluctance in the years to come,” he said in the annual report.

CESC is one of the few companies which could manage the crisis (coal crisis) without many glitches. The Ministry of Power has allowed the import of coal for up to 10 per cent blending purposes and the company will go ahead with plans as per Ministry order, he said.

Although electricity tariffs remained unchanged during FY22, the company managed to post close to five per cent growth in total standalone income (including other income) at ₹7,479 crore.

Though the company’s growth is still not back to the pre-Covid levels as on March 31, 2022, it expects to touch the pre-pandemic levels by the end of the current financial year, Goenka assured the shareholders. To a question about inorganic growth, Goenka said, “We are always open to the idea of growth and we will examine every worthy opportunity that comes our way.”

Distribution and generation

The company, which currently handles close to four million consumers across six locations in India, has taken a number of initiatives on the distribution and generation front.

For the Kolkata operations, CESC generated 10,003 million units (MU) DURING 2021-22, out of which over 98 per cent came from the 750 MW generating station at Budge Budge and the 600 MW generating station at Haldia. Budge Budge and Haldia have consistently excelled in operating efficiencies, energy conservation, quality systems and processes, the annual report said.

CESC’s distribution infrastructure serves 3.5 million customers in Kolkata, Howrah, Hooghly, North and South 24 Parganas. In 2021-22, some 1.5 lakh meters were installed, of which over 97,000 were new connections. Distribution losses have consistently reduced over the last few years and continued to do so in 2021-22.

CESC has two thermal power projects with a capacity of 600 MW at Chandrapur (Maharashtra) and a 40 MW atmospheric fluidised bed combustion power plant in Asansol (West Bengal). In addition, it has an 18 MW DC solar power project at Ramanathapuram (Tamil Nadu).

Chandrapur and Ramanathapuram have long-term power purchase agreements, while Asansol operates in the merchant power market. Goenka expects Chandigarh distribution to be handed over to the company soon. The company has won the sixth distribution licensing area outside Kolkata in Chandigarh.

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