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For years, Jharkhand avoided paying electricity dues to Damodar Valley Corporation (DVC) running up a massive bill of Rs 5,500 crore. But, the story is now set for a correction.
According to sources, the State may be asked to sacrifice Rs 2,334 crore Plan fund allocation for 2013-14 to settle part of the dues to DVC. There is also a move to force the State to henceforth enjoy supplies only against full payment.
The Plan fund settlement will surely hurt Jharkhand. But, the Centre has little option either.
Lopsided finance
At an average of Rs 79 crore worth of dues (from Jharkhand) piling up every month, approximately Rs 1,000 crore of estimated annual revenue is unrealised. In terms of cash flow, almost the entire 16 per cent margin granted by the electricity tariff regulator is never realised.
To add to the woes, social responsibilities such as flood control, and irrigation bring home a net deficit of Rs 50 crore a year.
A cash-strapped DVC refinances the working capital gap through short-term (9-12 months) credits from a host of commercial banks including State Bank of India. Approximately Rs 1,100 crore of such loans are slated for repayment between March and June.
But, DVC is hardly left with cash to fulfil its repayment commitments. A default may not only create non-performing assets with banks, but will also impact the loan disbursements to DVC’s ongoing projects.
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