Cesco, which is now controlled by US utility company AES Corporation, isworried that the Orissa Electricity Regulatory Commission (OERC) would notallow capital investment in rural areas where returns will be unusually low.The distribution company's apprehension stems from the fact that the OERC,in its recent tariff order, had disallowed the Rs 15 crore it had spent inrural electrification before the super cyclone as capital investment. Cescohad asked for a 25 per cent hike in the tariff stating that it had spent Rs15 crore in rural electrification. However, the OERC allowed only a four percent hike stating that the investment made in rural electrification will besubsidised by the state government.

"Now in view of the OERC tariff order, we will consider whether or not wewill go ahead with the restoration work in the rural areas in thecyclone-affected areas," Cesco managing director Anil Gupta told TheFinancial Express. He said that Cesco would file a revision petitionbefore the OERC on the issue. "We are also talking to the government seekinggrants to carry out the restoration work in the cyclone-affected areas."

Cesco has already completed 60 per cent of the restoration work during thepast two months and has spent about Rs 70 crore on it. It has estimated thatthe total expenditure on restoration would be in the order of Rs 130 crore.Besides the twin cities of Cuttack and Bhubaneswar, power supply had beenrestored in all the towns and block headquarters in the coastal Orissadistricts, Gupta said.

Cesco is expecting to incur a loss of Rs 178 crore this year as the OERCallowed a revenue of Rs 532 crore as against its projected requirement of Rs710 crore. The distribution company has been allowed a transmission &distribution loss of 35 per cent as against its real loss of 48 per cent.Currently, Cesco is able to bill for only 52 per cent of its power purchasedand collect revenue of up to 70 per cent of the total billings.

However, the company, with a consumer base of six lakh, is expecting toreach the break-even point in 2002-03 when its T&D loss would come down to25 per cent. The reduction in T&D loss would enable the company to save tothe tune of Rs 130 crore per annum at the present rate of tariff.