Rajasthan Electricity Regulatory Commission

Jaipur

Annual Revenue Requirement

Filed by

Jodhpur Vidyut Vitran Nigam Limited

………

Mr. Arun Kumar, Chairman

Mr. Shanti Prasad, Member

Date of Order                                                 10^th June 2003

ORDER

1.         The Jodhpur Vidyut Vitran Nigam Ltd. (Nigam for short) submitted on 05.06.2002 a statement of its annual revenue requirement (ARR) for the year 2002-03 as required by the RERC (Tariff) Regulations 2000. The statement contained un-audited accounts for the period 19^th July 2000 to 31^st March 2001 and the revised budget estimates for the year 2001-2002. As the year 2001-02 was already over, the Commission directed the Nigam to furnish audited accounts and not estimates for the year 2001-02. The Nigam submitted revised statement of annual revenue requirement on 31.10.2002.

2.         The Nigam also submitted its annual revenue requirement for the financial year 2003-04 on 10.1.2003. The annual revenue requirements of the Nigam for the year 2002-03 and 2003-04 were placed before the Commission on 1.2.2003.

3.    In terms of the RERC (Tariff) Regulations 2000, the ARR for the year 2002-03 should have been submitted by 31^st December, 2001 and for the year 2003-04 by 31^st December 2002. These revenue requirements were not filed before the Commission within the time allowed. The Nigam mentioned that State Government took time in finalizing the amendments to transfer scheme, which resulted in delay in finalizing of accounts of the Nigam and consequently in filing this annual revenue requirement.  Considering the reasons advanced by the Nigam, the Commission admitted the statements of annual revenue requirements for both the years on 1.2.2003.

4.      The Nigam submitted a revised set of annual revenue rquirement            for the year 2002-2003 on 21.02.2003.

5.                  While admitting the annual revenue requirement, the Commission considered it appropriate to invite objections and comments on it from general public and directed the Nigam to publish a notice in the newspapers containing the salient points of the revenue requirement.

6.                  The notices were published in the following newspapers on the   dates mentioned against each:

                                                                  FY 03                                FY 04     

1) Rajasthan Patrika                  22.02.2003                     22.02.2003

2) Dainik Bhaskar                        22.02.2003                     22.02.2003

3) Indian Express                        22.02.2003                     22.02.2003

7.      The Commission had also made a press release giving the details of revenue requirement for wide publicity for inviting the objections. The objections were received from following persons:

1. Shri Subhash Chandra Sharma, Secretary, Hanumangarh Vikas Sangharsh Samiti, Hanumangarh.

2. Shri K.L. Jain, Hon. Secretary, Raj. Chamber of Commerce & Industry, Jaipur.

8.        The Commission forwarded the objections to the Nigam and replies furnished by the Nigam were sent to the objectors.

  9.     The ARR for both the years 2002-03 and 2003-04 are dealt with by the Commission in this order.

Consideration of objections

10.             The Commission held public hearings at Jaipur on 29^th April 2003 and heard the objectors. The objections raised are discussed in the following paragraphs:

T&D Loss

11.       Shri K.L. Jain expressed concern over continued heavy T&D losses of the Nigam and its failure to achieve the targets fixed by the Commission. He argued that the Nigam must bring down its loss levels as directed by Commission. He also expressed that there was no correlation between capital investment & reduction in losses. Shri Subhash Chandra stated that T&D losses are high mainly due to overloading of lines & transformer. Pilferage is not being plugged. He suggested that meters should be installed on the pole for reducing pilferage. The Commission shares the concern of the objector and considers reduction in T&D losses as the most critical activity in improving the performance of the utilities. This issue along with other issues raised by Shri Jain has subsequently been discussed in this order. As regards capital investment, it may be stated that capital investment also caters to the need of load growth & new service connections and loss reduction may not be directly related to capital investment.         

 Sale of Electricity

 12.      Mr. K.L. Jain requested the Commission to realistically assess the sale of electricity to various categories of consumers. He expressed his concern over negative growth in sales to industries and requested for rationalisation of tariff for promoting consumption in industry. He also raised the issue of cross subsidy to agriculture sector, which should not be the reason for higher industrial tariff. He also pointed out that revenue realisation per KWH is much higher than Rs. 2.13 per KWH at which energy is purchased by Vitran Nigams, as such there is scope for reduction in tariff for industrial sector.   This aspect is related to tariff and would be considered as & when tariff petition is filed.     

Employees’ cost

13.       Shri K.L. Jain and Shri Subhash Chandra raised the question of the employees’ cost and said that the petitioner has not raised the strength of employees and costs should also not rise on this account. Shri K.L. Jain expressed that there is a need to improve the work out put per employee in all the Nigams.

Interest Charges

14.       Shri Jain pointed out that there is high increase in interest & finance charges. The failure of the state government to pay subsidy has led to increased borrowing by the petitioners. The increase in interest charges on this account should not be passed on to the consumers.

Capital Base

15.       Shri K.L Jain drew attention of the Commission to the calculation of capital base of the petitioners. He pointed out that in case of all the three Nigams the capital base is turning negative which is a cause of concern.

General

16.       Shri Jain argued that the Commission should evolve a system of energy audit of the Nigam through an independent agency.

17.       Shri Jain stated that in view of his observations, the Nigam should have a relook of its proposals. Mr. Jain requested for examination of revenue realised per unit of electricity sold and emphasised the need for rationalisation of tariff at the appropriate stage.

18.       Mr. Subhash Chandra also pointed out that the reply furnished by the petitioner was incomplete and inaccurate. He also raised the question of charging of rent of meter when the consumer has already purchased the meter & that minimum billing rates are high. It is stated that these are related to tariff and are not relevant to this petition. He expressed that subsidy should be paid in full by the Govt. and its burden should not be reflected on consumers specially NDS consumers. He expressed that petition be considered only after compliance with Commission’s directions.

Compliance with Commission directions

19.       Before the Commission considers the annual revenue requirement as presented by the Nigam and the objections raised thereon, the Commission would like to review the implementation of the directives given to the Nigam vide its tariff order dated 24.3.2001. The status of implementation of the various directives of the Commission is given in the statement below:

Table –1

20.       The above statement shows that except for the directives relating directly or indirectly to reduction in T&D loss & preparation of asset register the Nigam has by and large complied with all other directives of the Commission. The Commission is of the view that reduction in T&D losses of the Nigam is of paramount importance to its financial health, in fact, to its very survival. The Commission has accepted in its tariff order dated 24.3.2001 the target proposed by Nigam for reduction in T&D losses. The Commission notes that Nigam has totally failed to achieve the target set by Nigam for itself for reduction in T&D losses. On the other hand, the figures furnished show that the actual loss level has increased since the process of reform was initiated in the State. As the exact level of losses could not be determined with any degree of reliability, the Commission had directed a field study to be carried out by the Nigam for ascertaining the existing level of losses. The Nigam has taken this directive in a casual manner and the study has been commissioned only recently and some more time would be required before initial results of the study are available.

21.       The Commission in its order dated 24.3.2001 had also asked the Nigam to reduce its loss to the level of 20% in five years for which   an action plan was to be prepared. The Nigam did prepare a comprehensive long term action plan for reducing T&D losses but the Commission is disappointed to observe that very little has been done for implementing the plan.

22.       Similarly the Commission had directed energy audit for 11KV feeders. This work was also inordinately delayed and necessary action on the basis of the information received by such energy audit is yet to be initiated.

23.       The only inference which could be drawn from this state of affairs is that the Nigam has not realized the importance for improvement in its efficiency on which the survival of Nigam hinges. With such heavy level of losses, the Nigam has already started moving towards financial collapse as has been revealed subsequently in this order. Immediate remedial steps have to be taken and vigorous efforts will have to be made for reducing the loss level without further loss of time. This issue has further been discussed while fixing the target for reduction in loss level for the year 2003-04 onwards.

24.       Very little progress has been made in respect of another directive relating to completion of register of assets. The Commission does not have to emphasize the significance of such a register for the Nigam. The Commission directs that the asset register may now be completed by 30.09.2003. Other directives, not fully complied shall continue to be enforced by the Nigam. 

Review of financial year 2001-02

25.       The following statement gives the figures for sale of energy to different category of consumers for the year 2000-01,Commission’s projection for 2001-02 and the actual for 2001-02.

Table –2

26.       It would be clear from the above statement that the over all sale of energy did not materialize to the extent the Commission has estimated in its tariff order. Against the increase in sale of energy of 12.18% as projected by the Commission, actual growth had been 1.28% only. The major short fall in the growth was in the category of agriculture metered consumers and domestic consumers. The reasons for not achieving the projected sale must be analyzed by the Nigam. The over all sales to industrial consumers have also declined. The Nigam will have to consider measures for promoting sale of energy to the industrial sector. The Nigam has an elaborate system for charging for electricity in case the consumers other than agriculture consumers are found indulging in mal- practice/theft. The Nigam should therefore, work out a system whereby such agriculture metered consumers as indulge in mal- practice/theft (including tampering with meters) are also charged in a deterrent way based on hours of supply, load factor, monthly average, etc. so that mal practice/theft by all consumers is discouraged. The Nigam should bring out a scheme for this purpose within a period of two months. The Nigam should also improve its construction/installation practices for service lines and meters to prevent such malpractices.    

27.       Coming to the revenue and expenditure for the year 2001-02, it is revealed that revenue from sale of energy has been lower by Rs. 256 crores (i.e. about 20%). The expenditure on account of interest and financial charges has increased by about Rs. 51 crores over the projection made by the Commission in its tariff order. The over all revenue gap for the year 2001-02 has also increased from Rs. 359 crores to Rs. 430 crores. It appears that additional borrowing for covering this increased gap has led to the increased cost on account of interest and financial charges. 

A.R.R. for 2002-03

28.       The year 2002-03 is already over. The Nigam has furnished figures for actual purchase and sale of power during 2002-03. Actual figures of expenditure and revenue will be made available later when the accounts are finalised. As the year is already over, there is no point in analysing annual revenue requirement for the year 2002-03 and the Commission would like to scrutinize the audited accounts when they are made available to the Commission. At this stage the Commission would however, like to make the following observations.

29.       The Statement given below shows the sale and purchase of energy as projected in the ARR and the actuals now furnished

Table –3

30.       It would be seen from the above statement that the gap between cost of power purchase and revenue realised from sale of power as projected in the ARR and actuals has increased by Rs.32.66 crores. Even if it is assumed that other expenditure and revenue have not changed materially from the projections in the ARR, in all likelihood the over all revenue gap would be higher than Rs. 524.60 cr. anticipated in the ARR.

Demand Assessment for 2003-04

31.       The Nigam has worked out growth rate for various categories of consumer based on compound annual growth rate (CAGR) for sales computed on data for 1999-2000, 2000-01 & 2001-02 and rate of growth for the period April 2002 to Oct.2002 vis-à-vis corresponding period of previous year. It has proposed negative rate of growth for large industrial consumers. The Nigam has proposed an overall rate of growth of 1.77%. Commission made its own assessment based on impact of number of consumers, switchover of unmetered agricultural consumers to metered ones, specific consumption, minimum billing, industrial recession etc.; the factors which were not considered by the Nigam.  The assessment of Commission was close to that of the Nigam for all categories except for domestic and agricultural service. The Commission therefore accepts as mentioned below the anticipated sales indicated in the ARR to all consumers except domestic and agricultural consumer.                      

Table –4

in MU

32.       The sales to domestic and agricultural consumers are discussed below:

Domestic consumers:

33.       Against 2 years CAGR of -1.11%and six monthly rate of growth of 3.43% in sales, the Nigam have proposed 4.0% rate of growth in the year 2003-04 and accordingly estimated sales of 945 MU for this category. It is observed that number of consumers have increased by 25,000 in 2000-01, 45,000 in 2001-02 & 60,000 in 2002-03, yet growth rate is negative. Increase in number of consumers considered by the Nigam for 2003-04 is 10,000 only, which appears on lower side. A figure of 35,000 is considered more appropriate vis-à-vis actuals of 2002-03. Specific consumption in KWh/consumer/year has declined. It was 695 KWh in 99-2000, 662KWh in 2000-01, 644 KWh in 2001-02 & 662 KWh in 2002-03 with practically no increase in connected load per consumer. As per form 2.1, the Nigam has conceived consumption of 683.3 KWh/consumer/year in 2003-04, which appears on higher side. Further high specific consumption in 2002-03 may also be due to elongated hot weather conditions. This may not be so next year. Specific consumption, as of 2001-02 i.e. 643.6 KWh/consumer is considered appropriate. The estimated sales to this category for 13,82,779 consumers will accordingly be 890 MU.

Agriculture consumers:

34.       The Nigam has assessed sales to agriculture consumers as under: -

(a) All new consumers (5000 in numbers) considered with average connected load of 10.07 KW and for assessment of consumption only 50% of such consumers are considered for full year.

(b) Connected load for all existing consumers has been taken same as that equal to average worked out for the FY 02-03.

(c) For new consumers, specific consumption is assumed at 913 KWh/KW/ year equivalent to 2.5 hours of consumption/day.

(d) All consumers converted from flat to metered category is assumed to consume in metered and unmetered category for half of the year and the specific consumption is taken the same as that of flat rate consumers.

35.       Agriculture service has metered as well as unmetered consumers. In its tariff order dated 24.03.2001, the Commission had directed the Nigam to convert all unmetered consumers to metered ones in three years. According to information available with the Commission out of a total of 81833 unmetered consumers as on 1.4.2001, 24,101 had been converted to metered category by 31.3.2003. The progress of conversion of unmetered agriculture consumers to metered one has been slow and it would not be possible to adhere to the time frame fixed for this purpose by the Commission and the Nigam may take one more year. Though the Nigam has proposed conversion of 100% consumers to metered category in 2003-04, but looking to the past practice it would not be feasible to convert all the remaining 57732 consumers in one year. The Commission therefore directs that at least 45,000 consumers may be brought under the metered category during 2003-04.

36.       Average connected load per agricultural consumer projected for FY 2002-03 in ARR is 8.42 KW for metered, 12.78 KW for flat rate (average 10.07 KW). Assumption of same average connected load for new consumer in 2003-04 is fair. It is observed that for metered supply, average consumption/KW/year has initially decreased from 945.7 KWh (in 00-01) to 514.6 Kwh (in 2001-02) and increased to 906.5 in 2002-03. For flat rate supply, it has increased from 1314.4 KWh (in 00-01) to 1390.5 KWh (in 01-02) and increased to 1477.1 KWh/KW/year in 02-03. The average consumption by metered consumers do not appear to be realistic.  The minimum billing for metered supply (for 5 HP i.e. 3.73 KW connection) is Rs. 12 x (200+50x2)=Rs. 3600 per HP. After accounting for fixed charges of Rs. 12 x 45=Rs. 540 per year, the component towards energy consumption will be Rs. 3060 per year, which is equivalent to consumption of 680 Kwh/hp/year or 911.53 Kwh/KW/year of energy charges @ 90 p/Kwh. Consumers will tend to consume electricity equal to minimum billing amount. Actual specific consumption for metered supply lower than that for unmetered consumers is indicative of prevalence of some malpractices, which need to be curbed.

37.       For T&D loss assessment, Nigam has considered 1028.6 Kwh/Hp/year i.e. 1378.8 Kwh/KW/year for flat rate supply in the last petition. This has been considered as norm by the Commission till other norm is fixed based on a field study. Higher figure adopted by the Nigam in 2003-04 will be required to be corrected. With change over of flat rate supply to metered supply, the metering of consumption may result in conservation and consumption may come down vis-à-vis unmetered/flat rate supply. Still it may not, in majority of cases, be less than the consumption for which minimum billing   is made. As such average of aforesaid minimum billing consumption and flat rate supply is considered for metered supply. In view of the above, consumption of 1145.2 Kwh/KW/month for metered and 1378.8 Kwh/KW/Year for flat rate of consumers for the year 2003-04 is assumed. In view of above discussion the estimated sales shall be 1086 MU for metered and 620 MU for flat rate consumers (i.e. total 1706 MU against 1538 MU assessed by Jodhpur VVN).

38.       To sum up, the estimated sale to domestic and agriculture consumer is given in the table below: -

Table-5

39.       Total sales for all categories of consumers will accordingly  (1828+890+1706) = 4424 MU against 4311 MU.

T&D losses

40.       As discussed earlier, the Nigam has not only failed to achieve the target for reducing T&D losses, but the losses had in fact gone up. The following table gives a picture of the projected loss levels and how the actual loss level has moved in last three years.

Table –6

41.       The target of loss level of 34.25% fixed for 2001-02 was on the basis of reduction of 5.4 percentage points over the level of 1999-2000 proposed by the Nigam. Instead of showing any reduction, the actual loss level has shown an upward trend reaching a high of 41.03% in 2002-03 worked out on the basis of provisional figures of purchase of total energy by the Nigam and its sales to consumers during the year. It can be inferred from these figures that the Nigam has not put in serious efforts for reducing distribution loss which instead of coming close to the target fixed has moved away from the target.  

42.       The Commission is of the view that with a reduction of 5.4 percentage point by the end of 2001-02, it was possible to bring down the loss level to 20% in a period of five years as directed by the Commission. However, the level at the starting year of 2000-01 has turned out to be much higher than the loss level indicated in the tariff petition. Moreover in the last three years instead of coming down, the loss level has increased by the end of 2002-03. At such high level of losses it is not possible for Nigam to carry out its operations without massive support from the State Government, which is unlikely to come. The only way to improve its financial condition and ensure its survival is by drastically bringing down the loss level by various measures identified by the Nigam in its action plan made for this purpose. The Commission however, finds that the Nigam has proposed reduction in distribution losses by only 2 percentage points in the financial year 2003-04. Such a low reduction proposed is also indicative of the lack of serious concern and real effort in this direction. The Commission is of the view that the Nigam will have to mobilize all its resources and implement sincerely the action plan and bring down its present loss level to 20% by the end of the year 2006-07. With determined efforts it is possible to achieve this level in this time frame. As the extent of Government subsidy that might be available to bridge the revenue gap is not known, the Nigam will have to reduce its dependence on Government’s subsidy and try to improve its own revenue collection. The Commission therefore, directs that the target of 34.25%, which Nigam had proposed for 2001-02 should now be achieved by the end of 2003-04. The Commission further directs the following targets for the next four years.

2003-04         -    34.25%

2004-05         -    27.28%

2005-06         -    23.29%

2006-07         -    20.00%

43.       The Nigam should galvanize its machinery and vigorously implement its action plan for reducing the distribution losses and achieving the target fixed for 2006-07.

44.       The Commission is also not satisfied with the efforts made by the Nigam in reducing distribution losses, which have in fact increased. As a token of its displeasure, the Commission would reduce the expenditure on purchase of power equivalent to 0.5 percentage point of distribution losses, which comes to about Rs. 11 crores for having failed to bring down losses in the last two years.

Purchase of energy:

45.       The Commission in Para 39 has worked out the total sales to its consumers by the Nigam as 4424 MU.

46.       In the tariff order dated 24.3.2001, the Commission had presumed that half the reduction in distribution losses may be reflected in reduced purchase of electricity and half in increased sales of electricity by consumers. There has been no reduction in the losses and the sales have increased only marginally whereas the purchase of electricity has gone up substantially. The increase in losses has resulted in increased purchase of electricity. The Commission, therefore, is of the view that the reduction in distribution losses may be reflected only in reduced purchase of electricity. On the basis of 34.25% for 2003-04, the Commission considers that the Nigam may have to purchase 6729 MU for sale to consumers instead of 6800 MU projected in the ARR.

Revenue Assessment

47.(a) Sale of electricity: The revenue from sale of electricity to different categories of consumers during 2003-04 is estimated below:-

Table –7

                                                                               Say:- 124024 lacs       

(b) Other Revenue   

   The Nigam has shown a total income of Rs.7248 lakhs from other sources. No income has been shown from transformer rent, temporary connections and for vigilance activity. The Commission has made some provisions from such income. The table below shows the details of such income for the years 2002-03 and 2003-04:-

Table -8

                                                                               Rs. In Lakhs

48.Assessment of Expenditure

(a) Power Purchase cost

As discussed in para 46, the Nigam may have to purchase 6729 MU of electricity during 2003-04. The existing tariff for bulk supply from Rajasthan Vidyut Prasaran Nigam (RVPN) is Rs. 2.13 per unit. Total cost of purchase of electricity would be Rs. 143327.70 lakhs. This is reduced by Rs. 1100 lakhs as per Para 44. Thus, total purchase cost allowed comes to Rs. 142228 lakhs.

The cost has been worked out on the existing bulk supply tariff. If at a later stage, this tariff undergoes any change, the power purchase cost would be modified accordingly.

(b) Operation and Maintenance cost

       This comprises Employee’s cost, Administrative and General Expenses and Repairs & Maintenance. The increase in employee’s cost and A&G expenses as proposed is quite high. Increase in pay due to increments may not exceed 2.5%. Average rise in DA has been 7.5% per year. This rise in Pay +DA will be around 5%. Considering this, only 5% increase in employee’s cost and A&G expenses, taking 2001-02 as the base year is allowed. In order to keep a check on such expenditure, the Commission would like the Nigam to keep the rate of growth less than its rate of growth of Employee’s cost and not to exceed the existing proportion. The Nigam shall ensure this. 

 The proposed expenditure on repair and maintenance as a percentage of gross fixed assets shows a decline from 1.25 in 2001-02 to 1.12 in 2003-04. This will adversely affect maintenance of lines and substations, which in turn will affect the quality of services to consumers. The Commission raises it to 2% of GFA to enable the Nigam to provide better services.

         With this observation, the Commission agrees to the expenditure as follows: -

Table -9

                                                 Rs. In lakhs

(c) Interest and Finance Charges

           The Nigam has estimated Rs. 14623.00 lakhs as interest and finance charges for the year 2003-04 out of which Rs. 154 lakhs will be capitalised. This liability includes “interest and finance charges” on borrowing made by the Nigam to meet cash deficit on account of subsidy not paid by the Govt. 

(d) Lease Rental      

            Lease rental of Rs. 401 lakhs proposed by the Nigam is accepted.

(e) Depreciation         

As mentioned earlier, the Nigam has failed to complete assets register and it is difficult to work out depreciation correctly. The auditors have pointed out that the Nigam continues to claim depreciation on assets on which ninety per cent depreciation has already been claimed. Similarly, there are assets, which have been sold, discarded, lost etc. whose value should be removed from the gross and net fixed assets and no depreciation would be permissible on them. In absence of firm data on the value of such assets, on the basis of an exercise done by the Commission, based on GFA and depreciation provision from 83-84, broadly assets created by 86-87 have depreciated by 90% and accordingly, it is assumed that about 12.5% of the gross value of assets would represent such asset as have depreciated by ninety per cent. Similarly, the assets mainly transformers which cease to be in possession of the Nigam may value about 4% of the value of GFA assets at the beginning of the year. Thus, the value of assets on which depreciation is not to be allowed for the year 2003-04 is calculated as under: -

Table -10

The Nigam has given category wise break up of its gross fixed assets for the year 2001-02 only. Useful life of assets in a particular category has been taken as that of its major component. For example, 25 years has been taken as the life of civil works relating to plants, machinery, lines, cable networks etc., 50 years for other civil works, 15 years for furniture and fixture, office equipment and five years for vehicles. On this basis, the overall rate of depreciation works out to 8.05%. The depreciation @ 8.05% of depreciable value of assets of Rs. 107509.08 lakhs calculated above, therefore, comes to Rs 8654.48 lakhs say Rs.8655 lakhs against Rs 7636 lakhs projected in the ARR. For current year onwards GFA & NFA need be reduced by the value of the assets damaged/ lost etc and depreciated value should be written off against provisions for contingency.

(f) Contingency Reserve

The auditors have expressed that the Nigam has not transferred 0.25% of gross fixed assets from its revenue to contingency reserve as per clause IV of the Sixth Schedule of the Electricity (Supply) Act 1948. Normally, reserves are created out of profits. However, it is observed that the Nigam has assets, which are not insured and may be damaged and written off for which a provision is required. In view of this, a provision of contingency reserve              @ 0.25% of GFA equal to Rs.268 lakhs is being made.

49.       Revenue Requirement

In view of the above discussions the revenue requirement is worked out in the table below:-

Table -11

50.       Accordingly, the Commission estimates likely revenue gap of Rs. 46756 lakhs at the end of 2003-04. This assessment is based on Nigam's achievement of the target of reduction in distribution loss. Any slippage would lead to a greater revenue deficit. At the estimated level of sale and purchase of electricity, one percentage point of distribution loss converts into approximately Rs. 22 crores. The Nigam shall have to ensure that the targetted level of distribution loss is achieved. For this purpose, it will have to closely monitor sale of energy to consumers, particularly the subsidized category and the purchase of energy from RVPN on a monthly basis. The Nigam will have to regulate purchase of energy to match with consumer’s requirement, keeping in view the distribution loss level to be achieved. The Commission directs that the Nigam should work out their monthly requirement, keeping in mind the seasonal variations particularly of agricultural consumers and convey its month wise requirement of energy to RVPN on the basis of distribution loss level to be achieved. This exercise must be completed by June 30 and communicated to the Commission. In addition to, it, the Commission would also like to monitor month wise purchase and sale of energy by the Nigam and watch Nigam’s performance in realising loss reduction target. In the assessment of monthly sales to unmetered consumers, Nigam should apply appropriate factor to account for seasonal variations.

51.       For improving its general financial health, the Nigam should take other steps as well. On perusal of the information on inventory relating to opening stock, and closing balances given for the year F.Y. 2002, it is revealed that the closing stock of inventory has increased from Rs. 13.64 crores to Rs. 39.99 crores. In order to reduce carrying charges, it is suggested that the level of inventory should be brought down to two month’s consumption.

52.       Although the Nigam has made attempts to bring down the level of debtors for sale of energy in terms of number of days sale from-85 days in F.Y.2002 to 81 days in F.Y.2003, more efforts should be made to expedite pace of realisation of revenue billed to bring down the level of debtors to 60 days sale of energy.

Financial Condition of the Nigam

53.       The table given below gives the revenue and expenditure of the Nigam, showing the gap between the two. The State Government has provided subsidy support of Rs.400 crores for the three Vitran Nigams, in addition to the electricity duty to be retained by the Nigams. Break up of Rs. 400 cores has not been given. The Commission allocates the same in proportion of deficit of the respective Nigam.

Table -12

Rs. crores

54.       It will be seen from the above statement that by the end of 2003-04, the cumulative revenue deficit of the Nigam is expected to be about Rs.1687 crores. This deficit is after tariff increase of nearly 17% with effect from April 1,2001. The subsidy actually paid by the State Govt. is Rs.251 crores till 31^st March 2003 and Rs.220 crores is anticipated in the year 2003-04. The net cumulative revenue gap would be around Rs. 1216 crores. This gap has so far been managed by deferring liabilities   of RVPN and by resorting to short term borrowings. Heavy borrowing for meeting revenue deficit is untenable and the Nigam has already landed itself in a precarious financial situation. It is all the more imperative for the Nigam to concentrate on measures for improvement in efficiency, including reduction in distribution losses. At the same time, the Nigam would require enhanced financial support from the State Govt. by way of subsidy to clear off the accumulated losses.

(Shanti Prasad)                                                   (Arun Kumar)

   Member                                                                Chairman