New Delhi, Jan 6: Crisil has cautioned the Madhya Pradesh Electricity Board(MPEB) of serious financial implications resulting from the IPP capacityadditions in the state. In its draft report on revenue projections of MPEB,whereas Crisil has supported addition of IPP capacities in the state for anoptimal bridging of the demand supply gap, it has, at the same time, warnedthat this would also result in a significant increase in MPEB's financialobligations in the coming years. While considering a 900 mw capacityaddition from IPP projects up to 2004-05, Crisil has projected the cash flowdeficits of MPEB resulting from this IPP capacity addition at Rs 1843 croreby the end of 2005.According to Crisil, in order to cap the cash flow deficits of the board andto support the inevitable 900 mw IPP capacity addition by 2004-05, MPEB willrequire additional budgetary support from the state government varying fromRs 1100 crore in the initial years, going up to Rs 1800 crore by 2004-05.
However, industry experts feel that it is quite unrealistic to assume thatthe state government, amidst its own financial constraints, will be in aposition to extend this kind of a budgetary support to MPEB.
The Madhya Pradesh government has been extending revenue subsidy to MPEB tocompensate for inadequate tariff adjustments and capital subsidy, fordevelopmental expenditure. The revenue subsidy budgeted for MPEB in 1998-99was a mere Rs 282.44 crore. Therefore, the extent of support which the stategovernment can provide is limited by its own financial imperatives.
Under this situation, the ability of MPEB to support IPP capacities andreduce cash deficits would then depend entirely on how effectively it canrationalise tariff especially with respect to the domestic and agriculturalsegment.
Towards this, Crisil has proposed a scenario, under which it has suggestedMPEB to increase tariffs for the domestic segment to 100 per cent of thecost of supply by the year 2003-04.
For the agriculture sector, Crisil feels that if realisations can equal 40per cent of the cost of supply by 2003-04 and 50 per cent of the cost ofsupply by the year 2008-09, the level of cash deficits may be manageable andMPEB will be in a position to support the future IPP capacity additions, asplanned, even with the limited budgetary support being extended by the stategovernment.
Last but not the least, Crisil has recommended that while considering anysuch capacity additions in future, MPEB must adopt a three-pronged strategywhich should take into cognisance , `least-cost most likely's supply option,fuel/generation technology mix and load profile & despatchability issues,leading to positioning of capacities as base/intermediate/peak.
Interestingly, the `least cost-most likely's supply option suggested byCrisil, matches with the state's government's decision of buying 600 mw ofpower from the Hirma mega power project. As per power ministry officials,the state government has already committed escrow to support 600 mw of powerpurchase from Hirma. The cost of electricity from this mega project wouldwork out to be less than half the cost of electricity from an IPP plant.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.