A question of ability to pay

THE PRESENT problem is not so much the price that the Maharashtra State Electricity Board has to pay for the power it buys from Dabhol Power Company - because it may eventually become cheaper than what is being paid now (Rs. 7 and more per unit) - as the ability of the power utility to pay. And for that, the State Government, given its penchant to give sops to farmers and loading the subsidy on the tariff paid by the industrial consumers, is clearly responsible.

If only the MSEB had been allowed to function commercially - which it clearly was not - then it would have had the financial muscle to pay the large DPC bills and scarcely would an eyebrow have been raised.

If there is a crisis, it is because the MSEB is running on a daily cash loss which, some estimates say, is about Rs. 5 crores a day. Its realisation from sale of all energy per month is only Rs. 920 crores and that is not much. It is a miracle it is not yet declared bankrupt. What has atrophied its financial muscle is the Government's approach to the detriment of the MSEB which once was a surplus utility but now has a peaktime power deficit of around 2,000 MW and is unable to pay Enron's bills.

If it can wait for the entire project to go on stream - currently only Phase I is on - and LNG is used in place of naphtha and the dollar against the rupee remains stable, the per unit price of energy from this source would remain stable. The MSEB then can perhaps digest the bills. The financial crunch is the cause of all its present troubles. It has had promises of conversion of loans from the Government of Maharashtra, estimated at Rs. 1,980 crores into equity but supportive provisions are yet to be made.

The quantum of subsidy doled out to various sectors from 1997 to March 2000 has been Rs. 2,800 crores and dues from the farming sector alone are at about Rs. 1,105 crores and ``it is only growing," an official said. Domestic consumers owe Rs. 550 crores. All that the MSEB needs is a ``disconnect and collect" fiat. It does not get that.

The State Government has often stepped in with promises of budget support for the sops it gives to the consumers, especially the farming sector, but it never delivers on the make-good payments to the board.

The backlog of recurring losses because of the subsidies is a whopping Rs. 817 crores and loss of liquidity due to the same sops announced from time to time is Rs. 665 crores as of date. And yet, a few days ago, the Power Minister, Mr. Padmasinh Patil, succumbed to the pressure of political peers and agreed to fresh concessions worth Rs. 700 crores.

It is a moot question whether this will be made good. But the political penchant for such sops continues unabated. The MSEB had no funds to pay for its 30 per cent share in the DPC equity offered after the PPA with it was re-written during the Shiv Sena-BJP regime, converting the option of a Phase II into a mandatory requirement.

And the PPA covers the two phases not separately but together and the burden at this point of time is awesome. Hence, the MSEB is unable to look at DPC in the long term.

In this context, unbundling the MSEB - its 14 circles are in escrow to the DPC for any potential default and the MSEB cheques even bounce these days - as required by the World Bank also has no point if reforms including a will to insulate them from political interference do not surface.

As one source, in exasperation, said: That means three new sets of offices, one each for generation, transmission and distribution wings and thrice the total meddling. All it needs is commercial freedom.

M. V.

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Section  : Business
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