Jharkhand State Electricity Board?s (JSEB) R5,000-crore arrears to Damodar Valley Corporation (DVC) has started hitting the latter?s cash flow, forcing DVC to source working capital through high-cost short-term loans.
India?s second largest power utility, the 4,857-MW capacity DVC supplies 250 MW to Jharkhand from its 1,000 MW Durgapur Steel Thermal Power Plant. This costs JSEB about R145 crore per month. But JSEB has been paying a little more than half the bill every month, accumulating dues of R5,000 crore including a delayed payment surcharge in the last three years.
DVC chairman RN Sen told FE the dues have started impacting the cash flow of the company since Jharkhand accounts for more than 20% of DVC?s power sales revenues pegged at R700 crore per month. JSEB?s growing dues results in a mismatch between the net sales figure and the actual realisation, which is impacting the bottomline, admitted TK Gupta, DVC?s director, finance.
DVC ? a three-way venture of the central, Jharkhand and West Bengal governments ? is already creaking under its R24,000-crore project funding debt. It has borrowed R2,200 crore for working capital, for which debt servicing starts this month.
Gupta said the repayment terms are on an incremental basis, adding the working capital loan will cost the company R100 crore in September, and grow to R600 crore by December (including interest and principal amount).
But DVC is finding it tough to raise short-term working capital loans too since banks consider the R5,000-crore dues as non-recoverable, Sen said. Jharkhand is scheduled to get another 650 MW from upcoming DVC units but the company has asked for a government guarantee against the power purchase agreement that has to be signed.
Sources in JSEB said the Jharkhand government has initiated unbundling or restructuring of its board. However, before it is done, it must clear its books of accounts clearing all dues. There is a possibility that the Centre may ask DVC to waive the Jharkhand dues but Gupta said that will hit the company?s bottomline.
Although Gupta didn?t want to share the company?s net profit in FY12 since it is yet to be placed before the board, he said the company?s revenue from power sales grew 30.72% year-on-year to R7,523 crore selling 19,857 million units.
Operational profit grew 14% y-o-y to Rs 800 crore. But depreciation and huge interest outgo had its impact on the bottom line, while the cost of operations escalated with new units adding up to 2,500 MW installed last fiscal.
?Our return on investment will depend entirely on the additional revenue generated from additional capacity and we cannot leave any dues un-recoverable,? Sen said. He said there is a tripartite agreement between the Union government, Reserve Bank of India and DVC that if a power utility fails to pay its dues in 90 days, the government of India is liable to clear the dues. ?We want to bring this agreement into force,? Sen said. The Centre has laid down a condition that in case a distribution company fails to pay the generation utility its bill, the generation company will have to regulate power supplies up to 15%. ?We have done it and so the Centre is liable to clear us the Jharkhand dues,? he said.
DVC has worked out a securitisation of Rs 1,728 crore against the dues and will soon approach the regulator (either CERC or JERC) to immediately reimburse this amount, Sen said. ?The government should protect DVC in the interest of the country,? he stressed.
