Power shock: Uday didn't check discom losses, RBI says another bailout needed
One of the biggest reforms in the power sector, the Uday or the Ujjwal Discom Assurance Yojana, has failed to nursing the stressed electricity discoms back to health.
 
Rather than easing financial stress of state-run discoms, the utilities currently are back in a crisis situation with rising levels of losses and an ever-increasing debt burden.
 
The situation has reached such alarming levels that a recent report by Reserve Bank of India (RBI) on state finances has indicated that another round of bailout may be required to bring some degree of balance to the sector.
 
Besides, the apex said that the financial position of discoms is expected to weaken further in 2020-21 as the Covid-19 related lockdown has severely impacted power demand.
 
"Even post-UDAY, state owned enterprises in power distribution (Discoms) continue to impart significant downside risk (leading to higher states' liabilities) with no visible signs of turnaround. States' outstanding liabilities increased by 1.5 per cent of GDP due to UDAY in 2015-16 and 2016-17; however, despite this steep fiscal cost, discom losses since then have reached pre-UDAY level of 0.3 per cent of GDP in 2018-19," RBI said in its report on state finances.
 
In fact, adjusted for revenue grants made under UDAY - which are transitory and in the nature of accounting transfers, discom losses are significantly higher in 2018- 19 vis-a-vis 2015-16.
 
Estimates of the revenue gap per unit of power sold - average cost of supply minus average realisable revenues (ACS-ARR gap) for 2019-20 reveal that most states have seen a further worsening in their financial performance. Only five states - Assam, Goa, Gujarat, Haryana and Maharashtra - have eliminated revenue gaps in 2019-20, thus meeting the UDAY target.
 
Jammu and Kashmir, Rajasthan, Andhra Pradesh and Telangana have the highest revenue gaps, which have which have widened further in 2019-20.
 
A look at the data shows that revenue gap for states such as Bihar, Andhra Pradesh, Rajasthan, Tamil Nadu has increased between 60 paisa to Rs 1 per unit in FY20. This means that discoms are losing this amount on selling electricity to consumers. The gap is highest in Jammu and Kashmir at over Rs 2 per unit.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    m.prabhu.shankar

    4 weeks ago

    Better Union Govt take care of only the Union Govt responsibilities and leave the things like Electricity Generation and Distribution to state govts and in that way state govts will be made completely responsible for meeting the electricity requirements of the people of the state. De-centralization is the key to India's success. But BJP Govt is more focussed on doing the exact opposite.

    Haryana RERA Caps Brokerage to 1% for Real Estate in the State
    In a first, the Haryana Real Estate Regulatory Authority (HRERA) has approved a maximum one per cent brokerage on sale or purchase of property in the state, officials said on Tuesday.
     
    Taking cognisance of the complaints that property dealers were charging arbitrary commission both from sellers and buyers, a bench headed by HRERA chairman KK Khandelwal and comprising member SC Kush took this decision recently.
     
    For registered real estate projects, it has been decided to issue restraint orders to all promoters and brokers to refrain from charging commission more than what is prescribed as per the Haryana Regulation of Property Dealers and Consultants Rules of 2009 under the Haryana Regulation of Property Dealers and Consultants Act of 2008.
     
    Rule 10 provides 1% commission on agreed consideration value to be paid by the seller and purchaser of the property, i.e., 1/2% by each on the finalisation of the deal as per their agreement entered in the register of the dealer under valid receipt.
     
    Elaborating, Mr Khandelwal said that property dealers or brokers are indulging in malpractices in connivance with promoters and charging more than prescribed commission both from sellers and buyers.
     
    Commission as high as 5% -10% of the property value was allegedly charged by agents and the burden was ultimately shared by allottees.
     
    Accordingly, all real estate agents have been cautioned not to charge commission more than what was prescribed in the rules. Doing so would be deemed as an outright violation of the provisions of the law, he added.
     
    The bench ordered a forensic audit of accounts of nearly two dozen erring builders and brokers.
     
    Furthermore, instances have come to the notice of the Authority that some property dealers were falsely representing services of a particular standard or grade and making false or misleading representation concerning approvals for various projects.
     
    The HRERA chairman said that certain real estate agent and brokers were also involved in issuance of misleading advertisements for upcoming projects.
     
    "It has been noticed that some brokers/property dealers are indulging in sale of property in unauthorised colonies as well. A vigil is kept on such brokers so that their registrations are cancelled and criminal/civil action, as per law, initiated against them. It is mandatory for the brokers to keep the copies of relevant approvals/plans, specifications, brochures etc of projects where deals are facilitated by them," Mr Khandelwal added.
     
    The licences to brokers/property dealers are granted by deputy commissioners concerned under the Haryana Regulation of Property Dealers and Consultants Act, 2008. The registration of property dealers to negotiate/mediate real estate deals of a registered project is done by the Real Estate Regulatory Authority under Section 9 of the Real Estate (Regulation and Development) Act, 2016 and the registration is then granted subject to the condition that the real estate agent shall not contravene the provisions of any other law as applicable to him.
     
    "We have noticed that some property dealers/agents ... do not have necessary documents. They shall also be penalised, including cancellation of their registration with the Authority along with recommendation to the deputy commissioners concerned for withdrawal of their licences," he said.
     
    HRERA was in the process of prescribing a code of conduct for property dealers to make sure that they abide by such norms so that there are no unfair trade practices, said Mr Khandelwal.
     
    The code of ethics would prescribe not only additional books of accounts to be maintained by property dealers to commission charged as per the law and also records of transactions which may be perused by the Authority in case of inter se dispute between buyers and brokers.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    In Bezos vs Ambani Battle, Focus on Disclosures by Amazon
    In the Jeff Bezos vs Mukesh Ambani battle royale for the Indian retail market, which is now also evolving into a 'videshi vs swadeshi' battle, questions are being raised by corporate watchers.
     
    Eight absolutely unknown facts are emerging in the Bezos vs Ambani battle.
     
    1. Has Amazon's Jeff Bezos disclosed all of the Amazon-Future agreements to Future Retail Ltd (FRL) shareholders?
     
    To this, corporate watchers say no. Mr Bezos has invested 49% in Future Coupons Ltd (FCL), a promoter company of FRL. 51% of FCL is held by Kishore Biyani, an Indian resident. FCL, in turn, has 9.82% holding in FRL.
     
    It looks as though that FCL is controlled by Biyani with his holding of 51%. This is a requirement under India's FDI regulations.
     
    Mr Bezos cannot hold directly even one share in FRL. On the face of it, he seems to be in compliance with FDI regulations. But, the reality is different.
     
    In a two-tier structure, Mr Bezos has taken control of FRL, which is prohibited under FDI Regulations:
     
    (i) Tier-1 is a shareholders' agreement between FRL, FCL and other promoters of FRL - in terms of this agreement, without FCL's consent, FRL cannot transfer its assets or business to any third party and its board cannot even consider such a proposal.
     
    (ii) Tier-2 is a shareholders' agreement between FCL, Amazon and other promoters of FRL - in terms of this agreement, Mr Bezos has taken over the rights of FCL under the FRL shareholders' agreement.
     
    (iii) Thus, effectively Mr Bezos controls FRL.
     
    The Future Retail shareholders' agreement and the Future Coupons shareholders' agreement have never been disclosed to any Indian regulator.
     
    If they are disclosed:
     
    (i) SEBI (Securities and Exchange Board of India) will find that Mr Bezos has taken control of FRL and will mandate him to make an open offer at a price of Rs500 per share.
     
    (ii) ED (enforcement directorate) will find that Mr Bezos has invested in and taken control of a multi-brand retail company without government approval and hoodwinked the government of India.
     
    2. Has FRL amended its articles of association?
     
    Amazon's rights in FCL were carried as part of the amendment to the articles of association of FCL.
     
    FRL's articles of association have not been amended. This is because, had the amendment been proposed to the shareholders disclosing that Amazon will exercise the rights of FCL under FRL shareholders' agreement, the public shareholders would have never approved it.
     
    3. Amazon could not have invested in FRL through FDI route under FDI policy. Then, how does it have enforceable rights against FRL?
     
    For this, Amazon has gone through the above mired (and convoluted) structure;
     
    FRL is engaged in multi-brand retail trade (MBRT); foreign direct investment (FDI) - up to 51% - in MBRT is allowed only with prior permission of the government, which will also be subject to veracious conditions, including sourcing of materials within India and management control etc;
     
    Amazon wants to control multi-brand retail space, but without any of the legal hassles; therefore, in a convoluted manner, it went ahead with the mired illegal structure; if the veil is pierced and the transaction structure is studied in detail, it will be found illegal, corporate watchers said.
     
    The fact that Amazon has obtained an interim order from the emergency arbitrator injuncting the public company, FRL not to proceed with the scheme, in spite of not having any direct shareholding in FRL, shows that the contractual rights are nothing but 'control', in violation of SEBI and FDI regulations.
     
    Mr Bezos is learnt to have followed a similar investment structure while investing in More Retail; where he invested Rs4,200 crore;
     
    For FDI violations, the consequence is, apart from annulment of transactions, Mr Bezos is exposed to penalty of up to three times the investment - Rs5,630 crore x 3 times = Rs16,890 crore, sources said.
     
    For violation of SEBI Takeover Regulations, apart from penalty, they may also be liable to be prosecuted.
     
    4. How, as a foreign company, Amazon asserted control over FRL and its board? And on FRL's shareholders?
     
    The assertion shows that Amazon has violated FDI and SEBI regulations. If Amazon asserts control, it needs to make an open offer.
     
    5. Amazon is asserting control over FRL. Does it violate FDI policy?
     
    Yes.
     
    6. Have all of the agreements been disclosed to regulators - SEBI, ED, etc.?
     
    No - details of transaction selectively provided - in an obfuscated manner
     
    ED, SEBI, ministry of company affairs (MCA), and other authorities, etc, must direct Amazon to disclose the agreements and details of actual arrangements in and commence inquiry.
     
    7. What is the crux of the SIAC'd interim order?
     
    It records that Amazon's entire investment was for its direct interests in FRL.
     
    8. Is Mukesh Ambani a competitor of Mr Bezos?
     
    Mr Bezos cannot carry on multi-brand retail in India. He can carry on only market-place e-commerce in India. Yet, his Amazon is referring to Ambani's Reliance as its competitor. Reliance can be Amazon's competitor only if the latter is permitted to do MBRT.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 4 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone