Maharashtra State Electricity Distribution Co Ltd, also known as MahaViataran, which has a consumer base of 19.5 million, is on the brink of a financial collapse, as banks refuse to sprovide working capital loans to the state-run discom.
Chief among its financial troubles is the company's inability to recover Rs 7,623 crore from consumers due to regulatory hurdles. Company officials said lenders had refused to provide loans to the discom, citing its financial strain.
Mahavitaran was also not able to make payments to Maharashtra State Power Generation Co and Maharashtra State Electricity Transmission Co.
Officials said the discom, which has proposed Rs 6,554 crore capital expenditure for the current financial year, would not be able to meet the target if the situation prevailed.
Mahavitaran has informed the Maharashtra Electricity Regulatory Commission (Merc) that its annual revenue requirement for the current financial year is Rs 50,000 crore. It has also proposed an average rate hike of 17%.
The company has incurred a cash loss of Rs 3,500 crore and made a record payment of Rs 1,000 crore towards interest on bank loans. Auditors have raised serious questions in this regard.
"Merc should immediately remove 10 per cent cap on fuel adjustment charge (FAC) and allow recovery of cost from consumers in the wake of fuel price rise. Gujarat and Andhra Pradesh have removed cap on FAC, while the Delhi power regulators have allowed tariff revision in every three months," A Mahavitaran official told Business Standard, on condition of anonymity.
"Accumulated amount of unrecovered FAC due to a 10 per cent ceiling has reached Rs 1,770 crore as on March 2012, which is adversely impacting the financial position of the company," said the official.
He added under-recovery of FAC resulted in an increase in current liabilities, especially when dues to MahaGenco rose to Rs 2,200 crore.
R V Shahi, former Union power secretary, said: "If MahaVitaran is having a loss of Rs 3,500 crore even after bringing down the aggregate transmission and distribution loss to 15.7% and taking collection efficiency to over 98%, the main reason is that it has not been given a cost-reflective tariff by Merc."
He added: "Besides, fuel adjustment charge has to be on actual basis as a pass through. The cost burden has to be a pass through as early as it happens."