West Bengal power sector illustrates the difficulties of power reform
Moneylife Digital Team 09 June 2016
The number of electricity connections in West Bengal nearly doubled to 16.37 million from 8.57 million between 2011 and 2016. Distribution transformers too increased by two-thirds to 2,22,000 from 1,34,000 over the same period. A majority of these additions was at the lower end of the consumer base as the government wanted to fulfil poll promises of assuring electricity connections.
 
However, there is not much to cheer about for the West Bengal State Electricity Distribution Company Electricity Board (WBSEDCL) despite the huge rise in electricity connections. ICICI Securities estimates that West Bengal's Aggregate Technical & Commercial (AT & C) Losses are likely to increase to around 30% for FY15-16 as compared to around 25.8% in FY08-19. A weak law and order situation and large scale addition to the lower end of the consumer base only lead to lower collections and electricity theft, according to ICICI Securities. 
 
West Bengal offers Rs200 crore – Rs250 crore subsidy to low end consumers. However, no subsidy is offered to agricultural consumers. Agricultural consumption of power merely stands at 5%. Industrial power consumption is down due to stress on iron ore businesses and weakness in commodity cycle. There is good demand for power from the service sector led by the Information Technology (IT) sector. Due to cross-subsidisation, industrial consumers in West Bengal need to pay a higher rate of electricity tariff. 
 
ICICI Securities estimates that state discom's FY15-16 revenue gap is around Rs20 billion. It has a whopping Rs130 billion loan for which WBSEDCL is paying interest at 10.5% p.a. Its debt equity ratio is high at 7.5, which rose from 6.2 in FY12-13. The discom reported marginal profits of Rs20 crore in FY14-15, which fell from Rs82 crore in FY12-13. However, despite these profits, the discom has been marred by large arrears and late payment charges. 
 
 Discoms in India are reeling under losses and huge debt burden. Their accumulated losses are approximately Rs3.8 lakh crore and outstanding debt of around Rs4.3 lakh crore. As part of the power sector reforms, the Central government has launched, Ujwal Discom Assurance Yojana (UDAY), a financial turnaround package for electricity distribution companies. However, West Bengal has not agreed to sign up for UDAY. 
Comments
Free Helpline
Legal Credit
Feedback