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Journalism of Courage
MUMBAI, APRIL 6: The power ministry’s notification regarding the rate of return (RoR) on investment earned by power licencee utilities has created confusion.
While licensees were demanding delinking their returns from the Reserve Bank of India (RBI) bank rates, the notification has stated that "the standard rate shall comprise in addition to the percentage referred to in sub-clauses (i) and (ii) of clause (b) the differential between 16 per cent and the RBI rate at the beginning of this year, for investments made thereafter".
According to BSES officials, the intention is to make RoR up to 16 per cent notwithstanding any revision in the bank rate by the RBI. The notification, though, can have different interpretations.
As per the present bank rate of 8 per cent, the notification can imply that the RoR will be 13 per cent (5 per cent above the RBI rate and the 8 per cent differential), or it may mean 21 per cent (if interpreted as 8 plus 5 plus 6 per cent differential), said TEC officials.
Among thepower licensees which have been demanding the delinking of returns are BSES, TEC, Surat Electricity Company, Ahmedabad Electricity Company, and CESC. The companies will soon seek a clarification on the issue.
Perhaps without the amendment in the Electricity (Supply) Act, 1948, the delinking from the RBI rates was not possible, said officials, adding that during the personal discussion, the ministry was willing to increase these returns, said power company officials.
Apart from this, one also has to clarify that the new norms are only applicable to the new investment. As per the existing norms, the ministry allows a power licencee to earn a flat RoR of 7 per cent on the investment made by it before 1964 and 2 per cent above the bank rate on the investment made between 1964 and 1991, and 5 per cent above the RBI rates on the investment made after 1991.
While the companies prefer a flat rate of interest, it is to be clarified whether the previous slabs still exist, said officials. The notification comesinto effect from the this financial year.
BSES, TEC acquire Orissa firms
MUMBAI: BSES and Tata Electric Companies (TEC) have taken over the four power distribution companies in Orissa. While BSES has acquired a 51 per cent stake in three state-owned power distribution companies in Orissa for Rs 117 crore, TEC will control the Central Electricity Supply Company of Orissa (Cesco) for which it has to pay around Rs 41 crore.
The three companies in which BSES will have a controlling stake of 51 per cent are Western Electricity Supply Company of Orissa (WESCO) Northern Electricity Supply Company of Orissa (NESCO) and the Southern Electricity Supply Company of Orissa (SouthCO). BSES has invested Rs 88 crore each for WESCO and NESCO and the balance Rs 29 crore has been paid for the 51 per cent equity of SouthCO.
The Grid Corporation of Orissa (Gridco) will hold an equity stake of 39 per cent in each of the three companies. The balance 10 per cent will be held by the employees trust. The net assets of 3companies are around Rs 605 crore.
BSES’s priority after acquiring three power distribution companies in Orissa will be to reduce the high distribution losses, according to company chairman and managing director RV Shahi. In Orissa, distribution losses are in the range of 40-45 per cent.
Commenting on BSES’s strategy in Orissa, Shahi said, "To manage these companies a small core group of BSES employees will work with existing employees of Gridco," BSES expects a turnover of Rs 1,100 crore from the three companies, which together supply around 6,600 million units. These have a peak load capacity of 1100 mw.
