Blow to Tata Power Company: No decapitalisation of assets

In a jolt to Tata Power Company (TPC), the state electricity regulator has disallowed the de-capitalisation of guest houses and other administrative assets as proposed by the firm.

The TPC, in its earlier truing up petitions, had submitted details of certain assets that were de-capitalised during 2008-09.

“TPC had stated the de-capitalised assets were corporate assets, which were being used as facilities meant for outside Mumbai licensed area operations, amounting to Rs34.62 crore,” said Maharashtra Electricity Regulatory Commission in its order regarding the TPC’s distribution business’ petition for truing up for the financial year ‘09-’10 and annual performance review for ‘10-’11.

Based on the submissions made by TPC, the regulator had allowed the impact of such asset de-capitalisation in its September 2010 order, but later raised a few queries to the firm.
The TPC submitted that de-capitalisation ensured that no burden was passed on to consumers of the licensed area on account of assets that are no longer used in the Mumbai license area.

“In case of de-capitalisation of assets, such as guest houses, where no replacement of asset is involved, the commission is of the view that TPC’s contention that any transfer of assets within the same company can only be done at book value, and market valuation would be relevant only if the assets were being sold, is correct, on a stand-alone basis.”