Odisha govt sets terms for financial assistance to electricity board

The state was not eligible to get funds under the R-APDRP programme post privatisation

The state finance department has laid down some stipulations for the extension of conditional financial assistance to Central Electricity Supply Utility of Odisha Ltd (Cesu), under Restructured Accelerated Power Development and Reform Programme (R-APDRP).

The department has held that Cesu must undertake to service the loan component of Rs 190 crore as per the terms and conditions of Government of India (GoI) along with a payment mechanism by authorising the state government to adjust the electricity dues of bulk consumers in the state government against interest payment and repayment liability of the APDRP loan in case of default.

Of the total project cost of Rs 400 crore, Rs 190 crore will be received from GoI by the Odisha government, which is to be passed back to Cesu on back-to-back basis at the same rate of interest and repayment terms. Cesu will have to give its consent to arrange counterpart funds to the tune of Rs 210 crore.

 

Since electricity distribution business was privatised in Odisha, the state was not eligible to get funds under the programme, which excludes private utilities.

However, Union ministry of power had agreed to offer financial assistance to Cesu under R-APDRP through the Odisha government.

The state energy department has urged Cesu to take a decision at the board level for accepting R-APDRP assistance and obligation of repayment of loan through the state government.

It may be noted that the Odisha government has been persistently demanding financial assistance under R-APDRP. Chief Minister Naveen Patnaik had sought the intervention of Prime Minister Manmohan Singh in this connection in February this year.

Stating that by availing R-APDRP assistance many states have substantially reduced the AT&C (aggregate technical & commercial) losses to below 25%, Patnaik said that Odisha was still suffering AT&C loss of about 40% on being deprived of R-APDRP assistance.

The R-APDRP as a Central sector scheme was being implemented with the objective of upgrading the sub-transmission and distribution network, including energy accounting and metering in the urban areas having population of more than 30,000.

As part of the reforms process, the Odisha government had unbundled the erstwhile Odisha State Electricity Board (OSEB) by structural separation and corporatisation of generation, transmission and distribution. 51% of OSEB's shares were transferred to four distribution companies- Cesu, Nesco, Wesco and Southco.

The reforms were carried out with the assumption that substantial investment in capital works coupled with investment in working capital under the regulatory mechanism of the OERC would result in reduction of AT&C losses.

Initially assisted by the World Bank and UK-based Department of International Development (DFID), Odisha took the initiative and became the pioneer state to reform the electricity sector.

However, the World Bank stopped financing capital projects midway and the distribution companies could not mobilise investment as a result of which the objective of substantial reduction of AT&C losses could not be achieved.