Mseb Reeling Under Financial Crisis

The Maharashtra State Electricity Board (MSEB) is under acute financial strain, according to an internal note prepared by the finance wing of the board. The note paints a gloomy picture of the boards fiscal position and confesses constant defaulting in payments to creditors and suppliers.

The note was circulated internally by the finance director on May 16. It comes at a time when the board is having ambitious plans to float 7-10 year bonds to take 30 per cent stake in the Dabhol power project. Doubts have been raised over the boards capability to service the bond issue to the tune of Rs 600 crore.

 

Another worrying aspect is the rating that the bond will attract in the backdrop of the poor financial position. Even if there is a sovereign guarantee, a top rating is not expected, a finance department source in the government said. The governments financial position itself is not anything to boast about, he added.

He reminded that the finance ministry has time and again voiced its strong objections to the boards plan to take a 30 per cent stake in the project promoted by Enron-led Dabhol Power Company.

Several suppliers are pressurising the board to open letters of credit. The note sounds helpless that the outstanding payments has kept on increasing over 100 per cent every fiscal from 1993-94 (No figures are mentioned for 1994-95).

The outstandings stood at Rs 76.35 crore in 1993-94, Rs 155.21 crore in 1995-96 and Rs 345.50 crore in 1996-97.

The note points out that the boards annual receipts have increased by 16.70 per in 1996-97 over the previous year and have not been commensurate with the 18.11 per cent increase in expenditure.

The board has been unable to discharge its committed liabilities in time for the payment of purchase of power to National Thermal Power Corporation, BSES and PowerGrid Corporation.

The board has also not been able to make timely payments for coal, electricity duty and interest on loan to the government of Maharashtra, the note says.

A repatriation target of Rs 7,363.56 crore from operation and maintenance was set during December 1996, but the actual collection was Rs 6,901.84 crore, showing a shortfall of Rs 461.72 crore. Due to this shortfall in receipts, the total outstanding payments as on March 31, 1997, was Rs 345.50 crore, the note says. The MSEB chairman P L Guzzalwar has set a modest target of Rs 1,100 crore for May 1997 including the current months sales as well as arrears.

It further says, Due to the tight financial position of the board it has also not been possible to send timely payment of the first, second and fourth instalments to the field offices.

In addition, the funds that have been sent to the field offices have been inadeqaute, inviting complaints from the staff and the suppliers. Similar is the position in the head office wherein there has been a delay of five months in payment to suppliers.

The board has recently been resorting to short-term borrowing to meet its working capital requirements and discharge its committed liabilities to NTPC, ONGC, Railways and Indian Oil.

The note says that this move has also put a further strain on the finances on the board.

It says: Not only have the receipts been inadequate to meet the expenditure but the arrears have also been increasing steadily.

The percentage of arrears to receipts for the period April 1 to December 31, 1996, was 25.92, with the arrears to the tune of Rs 2,273 crore.