Discoms file deficit ARR, demand assured profits

LUCKNOW: The four UP power distribution companies on Wednesday filed a multi-year revenue requirement (ARR) for the years 2017-18 to 2019-20, projecting a total deficit to the tune of Rs 20,618 crore during the current financial year alone. For the first time, the government-owned companies have also demanded 16% return of equity (ROE), in other words assured profits.

Based on the ARR, the discoms are now expected to file the tariff hike proposal soon separately to make up for the projected deficit during the current financial year. The revised tariff may, however, not come into effect before October-November as the UP Electricity Regulatory Commission (UPERC) is supposed to take 120 days to announce the tariff order after the proposal is submitted to it. The total revenue requirement projected by the four discoms -Lucknow, Varansi, Agra and Meerut -- together stands at a staggering Rs 68,674 crore, of which Rs 52,790 crore will be spent on the electricity purchase alone.

The Kanpur Electricity Supply Company (KESCO), the fifth discom, will file the ARR later.

The four companies together have projected their revenue earning as Rs 48,056 crore during 2017-18 against the expected expenditures of Rs 68,674 crore during the same year, leaving a huge Rs 20,618 crore revenue-expenditure gap minus the Rs 5,500 crore government subsidy expected during the year. Their revenue gap in the previous year’s ARR was less than Rs 8,000 crore.

What is significant is that the discoms have demanded an assured 16% return on their investment in the form of return of equity, which they claim is provided under rules.

“Demand of return of equity by government funded companies is unfair and if the UPERC accepts this demand, this means the consumers will have a tariff shock this time,” UP Rajya Vidyut Upbhokta Parishad president Avadhesh Kumar Verma said. He said this was ridiculous that discoms wanted an assured return without giving an assurance for quality service and their efficiency improvement.

As per the ARR, the four discoms will purchase 12,8908 million units of electricity worth Rs 52919 crore during the current financial year and if transmission charges are included, the amount comes to around Rs 54,787 crore.

“The average power cost on the part of discoms comes to around Rs 4.11 per unit whereas on consumer end it costs Rs 7.23 per unit on an average,” Verma pointed out. He also said the figures quoted in the ARR were not CAG-audited, which was contrary to the rules.

A UPERC official said the commission would now examine the ARR in detail and take a call accordingly. “Though we have received a multi-year ARR for the first time, for now we will focus on the ARR for 2017-18, the current year only,” he said.

Demand of return of equity by government funded companies is unfair and if the UPERC accepts this, it would mean a tariff shock for consumers AVADHESH KUMAR, president, UP Rajya Vidyut Upbhokta Parishad