Coal firms threaten to stop supply to state power utility

KOLKATA: Brace for the bad old load shedding days, particularly in the WBSEB area. In a stern warning to the West Bengal Power Development Company Limited (WBPDCL), the coal companies such as Eastern Coalfields Ltd have asked the utility to clear the arrears to the tune of Rs 590 crore. Or else, they would stop supplying coal. They have already slashed the supply by six rakes from 18 to 12 a day.The reason is the cash-strapped state power distribution company WBSEDCL, a major client of the generation company, is not in a position to pay up.
The trouble is likely to become more acute as state finance minister Amit Mitra on Friday asked the state power distribution utility, WBSEDCL, to defer the application for its annual tariff petition to West Bengal Electricity Regulatory Commission (WBERC) by a fortnight. The last date of filing the petition was July 31, and the law doesn't allow any state government to skip this date.
Only last month, despite strong resistance, WBSEDCL was dissuaded from applying for a tariff revision consequential to the coal price hike. Chief minister Mamata Banerjee, who is also the power minister, had restrained WBSEDCL from applying to WBERC for the coal-hike spurred
tariff revision. The populist decision (of not imposing power cost on the Bengal consumer) calls for a subsidy of Rs 500 crore due from the state government. But the state coffers are empty, leading to huge deficits on both WBSEDCL and its supplier, WBPDCL. The cash-strapped WBSEDCL is defaulting to the tune of Rs 60 crore (payable to the state government) and is unable to pay WBPDCL for the power it buys from it. This has spelt doom for WBPDCL which is also defaulting Rs 40 crore in coal cess (also due to the state government) per month and unable to pay for the coal it requires for power generation.
To pull up the deteriorating financial health of WBSEDCL and WBPDCL that had wiped out their operating losses in 2006, the utilities needed the annual tariff revision, which is but natural
. CESC that has already factored in the coal price hike on the basis of a regulation issued by the WBERC, applied for the revision on Friday. It already charges its consumers Rs 5.21 for a unit of electricity while WBSEDCL is forced to continue with the old rate of Rs 4.27 crore a unit. The concession could be balanced only if the debt-ridden state government manages to provide a subsidy of Rs 500 crore. And now officials in WBSEDCL have calculated that another such dooming decision (stalling the annual tariff revision) would cost the state exchequer a subsidy of Rs 2500 crore.
The state is bound by the Fiscal Responsibility and Budget Management Act (FRBM) against soliciting subsidy.
Officials in WBSEDCL and WBPDCL are clueless as to why the state is out to inflict such irrecoverable injuries to the power companies and make them sink in the process
. An official at WBSEDCL said, "All these decisions just don't make any sense because rules don't permit the state government to defer its revision petition to WBERC. The state government is only allowed to decline the tariff revision -- in that case it should provide the required subsidy."