MSEDCL in losses

Covid woes

The state’s distribution arm, MSEDCL, is the largest power supplying company in Maharashtra. It supplies power to the whole of Maharashtra and some parts of Mumbai. Recent data accessed by HT reveals that the agriculture sector owes ₹37,236 crore to the MSEDCL, while residential consumers owe ₹3,380 crore. Industrial and commercial consumers also owe ₹296 crore and ₹723 crore, respectively, among other categories.

Being a major agrarian state, agricultural consumers account for 25% of the total power consumption in the state, although they account for only 14% of the revenue generation, a report on the ‘The Curious Case of India’s Discoms’ by the Institute of Energy Economics and Financial Analysis (IEEFA) released in August 2020 stated. The revenue gap is owing to a tariff design where other categories of consumers pay a higher price to cross-subsidise electricity for agricultural consumers. The report state: “Even though the share of commercial and industrial consumers in total electricity consumption is 45% by volume, their revenue contribution is a much higher (at) 56%. Residential consumers take 20% of all electricity consumed and provide 20% of discom revenue.”

Shantanu Dixit, co-ordinator, energy group, Prayas, said that incorrect estimation in agricultural consumption through the years has also resulted in the ballooning of arrears. Dixit referred to a report by a working group formed by the Maharashtra Electricity Regulatory Commission (MERC) which stated that MSEDCL overestimated supply to the farm sector by 10,000 million units in 2018-19. “Apart from this, the political flip-flops on bill waiver in the state have resulted in a large number of well-paying categories also not clearing their dues on time,” Dixit said. Prayas is a non-government organization working in the energy sector in Maharashtra.

Other reasons for losses also include power thefts, aggregate technical and commercial losses (21% as of March 2020), and purchasing high-cost power from obsolete plants owing to long-term power purchase agreements, the IEEFA report states.

Ameya Pimpalkhare, an energy expert based in Mumbai, said, “A city like Delhi can afford to waive power bill because it is largely urbanised and the billing efficiency is also better. In Maharashtra, the arrears from agricultural consumers have accumulated for decades now. The power sector needs a serious recalibration now.”

When the national lockdown was imposed in March 2020, the MERC asked utilities to suspend physical meter-reading to avoid contact. It also asked utilities to charge consumers based on the average of the preceding three months – December, January, and February – of winter. “This effectively means that consumers underpaid in April and May, even though the consumption was high owing to summer and excess usage of power as everyone was home all the time. In June, when the actual meterreading began, the residual electricity amount was also taken into consideration, resulting in the high bills,” an official from MSEDCL explained.

However, citizens and even celebrities slammed the authorities on social media for the bills. Almost 1,100,000 consumers complained of excess bills, of which 752,000 were MSEDCL consumers. In August 2020, the state said it was planning to waive the excess bill by bearing the surplus amount for April, May, and June. State energy minister Nitin Raut in October said that consumers will get good news during Diwali.

Owing to these promises, pending complaints, job and business losses during the pandemic, more than six million consumers did not pay a single rupee towards their bill between April and November 2020. On November 17, 2020, Raut, however, said the state cannot provide any relief. An MSEDCL consumer, who did not wish to be named, said, “The state changed its stance from waiving excess bills to saying we will now cut the power supply. This may be the norm for repeat offenders, not for people who have received erroneous bills.”

Pratap Hogade, a power expert and also from the Maharashtra State Power Consumers’ Association, said, “We are demanding a 50% waiver for the six-month lockdown period.”

The associations also met Nationalist Congress Party chief Sharad Pawar recently with their demands.

Outgoing managing director of MSEDCL, Aseemkumar Gupta, last week told HT that MSEDCL has asked officials to take two steps – to take the top to bottom approach while recovering dues and to rectify errors or doubts in bills. Vijay Singhal, who has been appointed as the new managing director of MSEDCL, did not want to comment on the issue as he has just taken charge.

The way ahead

Last week, while unveiling a new amnesty scheme for farmers, chief minister Uddhav Thackeray appealed to them to make maximum use of the scheme and pay their bills on time. While experts say a waiver of any kind would prove to be disastrous for the state discom, there are ways in which issues can be resolved. According to Dixit, the state needs to immediately resolve pending billing complaints, especially in the agricultural sector. “There should be a permanent drive to resolve complaints and for timely recovery. Apart from this, people also need to be responsible and pay their bills on time, else ultimately quality and reliability of supply will suffer badly,” he said. Ashok Pendse, a power expert from Mumbai, said the issues cannot be resolved unless there is political will. “This whole mess is the government’s creation.”

The IEEFA report also lists a series of recommendations for MSEDCL to better its financial position. This includes meeting agricultural power demand through solar power, which will reduce the burden of cross-subsidy. It also suggests reducing its reliance on old, inefficient plants for procuring power and incentivising solar rooftop schemes in the state.