According to CESC vice-chairman Sanjiv Goenka, the state government had sent a letter to CESC Ltd last week clearing the project. Goenka was speaking to reporters after the company's 20th annual general meeting here on Wednesday.

He said the company was confident of coming out of the red, if the state government accepted its proposal for a tariff hike.

Goenka said the second 250mw second unit of Budge Budge thermal power station would be commissioned by March, 1999. "During our last meeting with the union power minister and the power secretary, they expressed their keen interests in implementing the Balagarh project," he said.

The cost of the Balagarh project has been reduced to Rs 2,065 crore from Rs 2,235 crore, which was estimated when the project was initiated in 1995.

Siemens AG has been selected as engineering-procurement contractor. Funds for the project are likely to come from various international and domestic financial institutions, including the Manila-based Asian Development Bank and the Washington-based International Finance Corporation.

However, Goenka said the company was yet to tie up with any of the financial institutions.

The CESC vice-chairman said the first unit of Balagarh would be commissioned by 2002, and the second unit in another six months. "Consumption of power will not be any problem. We can consume it ourselves and even can sell it outside," he said.

When it was pointed out that the demand will not pick up as expected, he said, "In Calcutta, demand will go up by 4 per cent per annum and there will be a significant jump in demand by 2003".

He said CESC was expecting a tariff hike of more than 22 per cent. Asked whether the company would be able to make a profit this year, he said, "if the state government accepts our proposals, we would surely come out of the red".

CESC has asked for a 28.5 per cent tariff hike with retrospective effect from April, 1998.

He explained: "If we are allowed to collect the increased tariff of two months in each month till the end of the current fiscal and then again start charging one month's hike from April 1999, we will have no problems."

"There is a precedence. BSES was allowed to do that," he pointed out.

Earlier inaugurating the AGM, Goenka explained to the shareholders why the company had incurred a loss of Rs 115 crore in 1997-98. "In spite of repeated efforts, CESC has been denied a fair revision of rates. During the last 47 months, there has been only a 2 per cent net tariff revision and that came only two years ago in November 1996," he said.

"The burden, to be precise," said Goenka, "is unbearable for any power company operating anywhere in the world. It is sad that it has taken years to get the state power department's agreement on how much money has been additionally spent by CESC on account of fuel costs and how much is recoverable through arrear fuel surcharge."

Pointing out that CESC is bleeding to the extent of Rs 11 crore a month on account of unrecovered fuel surcharge, he said, "It is sad that the vexing issue of fuel surcharge is not yet fully settled. On the one hand, because of belated decision we are collecting arrear fuel surcharge and, on the other, because of delay in decision, more fuel surcharge is getting accumulated on current account basis".

"Whether it is the small domestic consumer, or the small commercial establishment or the small industrial enterprise, CESC rates are perceptibly lower than what is charged by BSES in Mumbai," Goenka said.

Later replying to shareholders' criticism about the company's poor performance compared to BSES, Sanjiv Goenka said, "If we were allowed the tariff BSES is charging, we would have more reasonable return".

He also said CESC should lay greater stress on reducing transmission and distribution losses by modernising the distribution network and putting more checks on pilferage.

Shareholders accepted the proposals to buy back CESC shares and raise Rs 125 crore via equity.