Bengal in for a ‘powerful' shock

Pratim Ranjan Bose Kolkata. Jan. 25 | Updated on January 26, 2011 Published on January 26, 2011

Steep tariff hike inevitable as utilities are broke

Nearly 1.1 crore power consumers in West Bengal are in a fix. They should either endure a few rounds of steep hike in tariff this year or face crippling power cuts.

Apparently, the hike will be triggered by a clutch of petitions filed by the State-run generation and distribution utilities before the State-level regulator to raise nearly Rs 4,000 crore.

An official said that a sizable part of these petitions had already been accepted by the regulator as valid (but not allowed to be realised through tariff increase), allowing the utilities to book paper profit based on “regulatory assets.”

Heavy debt

“All the utilities are living on borrowed money and may not be able to sustain operations for more than 6-12 months,” the official said.

According to him, the generation utility – West Bengal Power Development Corporation (WBPDCL) – which had already piled up close to Rs 1,000 crore of short-term loans would be the first to collapse. Having managed a slender book profit of nearly Rs 30 crore, WBPDCL is now facing Rs 50 crore to 60 crore revenue shortfall a month against rising input prices.

The distribution utility, which is in a slightly better shape, has already witnessed a wipe-out of its Rs 700-crore reserves.

Hike inevitable

Rough estimates suggest that if current costs are included, award of the pending proposals (Rs 4,000 crore) may push the tariff to nearly Rs 8 a unit from the existing Rs 4.64. Any increase in generation and distribution costs in the future will magnify the impact.

As the magnitude of the tariff impact makes it impossible to realise the entire amount in one go, the utilities are expecting the regulator to approve cash flow in a phased manner.

“To begin with, we are expecting realisation of at least one-fifth of the dues and recovery of the entire current costs,” the source said, adding that any such award would increase average tariff by nine per cent to well over Rs 5 a unit.

Limited options

Theoretically, there are only two ways to spare the customers from the power shock. First, the State government may pick up the tab – an option which is not easy to exercise, especially in view of the poor health of the State exchequer.

Secondly, the regulator again defer the tariff order, as it did for nearly two years but only at the cost of disastrous consequences, especially on the generation front.

“Power tariff in the State is set to rise, or else we will not have enough money to buy coal (for generation),” said a State official.

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Published on January 26, 2011
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