World Bank Set To Revive Mseb Loan

The World Bank is likely to revive the disbursement of $250 million loan to the Maharashtra State Electricity Board (MSEB) that it had suspended in October last year. The board had received around 70 per cent of the loan when it was suspended.

There has been an exchange of letters between the two sides and the revival is just a formality, MSEB chairman P L Gajaralwar said in an interview to Business Standard.

The board had also initiated measures to comply with the various requirements under which the loan had been sanctioned, he added.

Under the conditions of the loan agreement, MSEB had to achieve a minimum annual rate of return of 4.5 per cent of the average net value of its fixed assets in operation. In 1995-96, MSEB had shown a negative return of 4.3 per cent for 1995-96.

 

The agreement also stipulated that MSEB carry out its operations in a sound commercial manner.

However, the Maharashtra government had issued directives to delay collection of arrears from certain categories of consumers in the agricultural sector.

The government had also made it clear that electricity should not be disconnected to consumers even when they are in protracted default.

The World Bank had also stipulated that MSEBs outstandings should not exceed 2.5 months of its annual revenue. However, this stood at 3.8 months of the revenue.

The state government had also not disbursed to MSEB a part of loan obtained by it from the World Bank.

Gajaralwar also rejected the Rajadhyaksha Committee reports recommendation to restructure the board into a company and get out of distribution.

He was, however in favour of the implementation of most of the remaining 32 recommendations. If the other recommendations are implemented, there is no need for restructuring, he said conceding that there was employee opposition to the board getting out of distribution.

The other major recommendation of the Rajadhyaksha report, is the setting up of a Maharashtra State Electricity Regulatory and Tariff Commission that would decide tariffs.

Another recommendation is that the government should stop interfering in the functioning of MSEB.

Although the World Bank is reportedly in favour of the implementation of the report, it has not made this a condition for reviving the loan, the MSEB chief said.