Loss-making state electricity boards (SEBs) can break even in three years if they hike tariffs by an average 10% a year, according to Credit Suisse.
Loss-making state electricity boards (SEBs) can break even in three years if they hike tariffs by an average 10% a year, according to Credit Suisse.
Among others, the Tamil Nadu SEB has to take a 26% tariff hike every year for the next three years to achieve breakeven, while those of Rajasthan, Madhya Pradesh and Andhra Pradesh have to take annual tariff hikes of 23%, 11% and 5%, respectively, Amish Shah and Abhishek Bansal, senior research analysts at the brokerage, said in a note on Tuesday.
Most SEBs are also expected to opt for debt restructuring plans.
According to Power Finance Corporation, the aggregate book losses (on accrual basis) of all the SEBs in the country went up from Rs24,796 crore in 2008-09 to Rs29,701 crore in 2010-11.
Tariff hikes effected by the SEBs during 2012 have helped cushion their financial position from deteriorating further, the Credit Suisse duo noted.
As many as 17 SEBs hiked tariffs during the year.
Tamil Nadu SEB effected the highest hike, at a whopping 37%, in March.
Uttar Pradesh SEB weighed in with a 17.6% tariff hike in October, while Madhya Pradesh, Punjab, Haryana, Maharashtra and Rajasthan SEBs increased tariff by 7%, 12%, 17%, 28% and 27%, respectively during the year.
The hikes came after many years – seven years in the case of Tamil Nadu SEB.
A highly placed official with a private company attributed the lag to the fact that the regulatory commissions do not allow annual tariff hikes fearing political and public backlash.
Curiously, in Maharashtra, while the State Electricity Distribution Co hiked tariffs 28% during 2012, private companies were not allowed to raise tariff for the last three years.
According to the official, The last approval for tariff hike given to Reliance Infra was in June 2009, while for Tata Power, it was September 2010. No revision in tariffs has been made by either
company since then. Currently, Reliance Infra is supplying power in Mumbai at an average Rs6.74 per unit, while BEST charges Rs7.78 per unit. Private companies elsewhere had it better during the year. The average tariff for the CESC-licensed area in Kolkata, for example, went up from `5.19 a unit to `5.88 per unit in March, to Rs6.03 in May.
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