BEFORE
THE
MAHARASHTRA ELECTRICITY REGULATORY COMMISSION
World
Trade Centre, Centre No.1, 13th floor, Cuffe Parade, Colaba, Mumbai
400 005.
Case
No.17 of 2003
IN THE MATTER OF
State
Government Subsidy on account of tariff for agricultural and powerloom consumers,
and certain agricultural consumers in drought affected areas.
Shri P. Subrahmanyam, Chairman
Dr.
Pramod Deo, Member
INTERIM ORDER
Dated
– August 26, 2003
Govt. of Maharashtra (GoM), in their
Application dated 30.5.2003, have sought that the Commission:
i)
give its approval to the
proposal for subsidy to be given to Maharashtra State Electricity Board (MSEB)
against the tariff determined by the Commission for agricultural and powerloom
consumers for the year 2002-03 in
the manner mentioned at para 4 of the Application.
ii)
allow Govt. to give standing orders to MSEB
that, whenever Government declares drought-affected areas, MSEB should indicate
the amount of subsidy and give the bill of the balance to the concerned
agricultural consumers in that area.
The Application was
heard on 12.8.2003.
2. In their Application and in oral submissions through Shri
Jayant Kawale, Secretary (Energy), GoM stated that the Cabinet has taken the
following decision on 7.5.2003:
i)
To give subsidy for the financial year 2002-03
to agricultural and powerloom consumers in the tariff determined by the
Commission as mentioned in Exhibits 'A-1 and A-2'. ((i.e. to the same extent as
in 2001-02), which are annexed to the Application.
ii)
To grant 33.33% subsidy in the electricity
bills for 2002-03 in respect of small and marginal agricultural consumers in
drought affected areas as mentioned in Exhibit 'B'.
iii)
To release the grant to MSEB equal to the
amount of revenue loss on account of GOM's decision mentioned above, and the
difference between the billing due to levy of electricity bill on meter basis
instead of horse power basis in respect of Powerloom consumers as mentioned in
Exhibit 'C' (for 2002-03).
iv)
In line with the above decision, MSEB shall
specifically indicate the amount of subsidy declared by the Govt. and the
balance as arrears in the electricity bills.
3. GoM have submitted that Rs 833 crores would be required to
finance the level of subsidy approved by the State Govt. against the tariff to
agricultural and powerloom consumers, and 1/3rd subsidy for small / marginal
agricultural consumers in drought affected areas for the year 2002-03. This comprises Rs 587.72 crore for
agricultural subsidy; Rs 123.86 crore for powerloom subsidy; Rs 64.41 crore for
subsidy to farmers in drought-affected areas, and Rs 57 crore being the
difference between metered tariff and HP tariff to powerloom consumers. This amount is to be met by book adjustment
of dues from MSEB to GoM on account of Electricity Duty (Rs 550.73 crore), inspection
fees (Rs 8.29 crore), guarantee fees (Rs 130.83 crore) and interest on Govt.
loan (Rs 143.15 crore). Such book
adjustment obviates the process of actual payment by MSEB to GoM, followed by
releases from the latter.
Secretary (Energy) submitted
that, under G.R. dated 31.3.2003, Rs 711.59 crores out of the total estimated
requirement had already been adjusted in this manner, leaving a balance of
around Rs 122 crores for further book adjustment. He also pointed out that MSEB had with them substantial amounts
on account of over-payments of subsidy for powerloom consumers for
2001-02. However, Shri Kulkarni,
Technical Director, MSEB intervened to say that, taking into account various
other commitments, the liability of GoM towards MSEB exceeded the payments due
from the latter.
4. In their written submission dated
4.7.2003 and through Shri Kulkarni at the hearing, MSEB have stated that the
amount of subsidy for 2002-03 has been estimated as Rs 832.99 crore on the
basis explained at Annexure 'B' of their letter. The actual amount payable may vary depending on the actual
billing, considering billing cycles (which are six-monthly in the case of
agricultural consumers). In case the
actual subsidy payable by GoM turns out to be higher, it should be permitted.
5. To a query from the Commission regarding compliance with
certain earlier directions, Secretary (Energy) submitted that orders have been
issued under the Chief Secretary's signature on 24.6.2003 that there can be no
interference in MSEB's power to disconnect for non-payment of dues, except to
the extent of allowing instalments for arrears. This had been accepted by the High Court (Nagpur Bench). These directions had also been tested
recently in the case of Aurangabad Municipal Corporation, when GoM did not
intervene.
6. Secretary (Energy) stated that GoM had a standing policy under
G.R. dated 4.3.1989 regarding the dispensation in times of scarcity, viz. not
to disconnect agricultural pump sets for arrears, and the grant of 1/3rd
subsidy against the electricity tariff for small and marginal
agriculturists. Referring to the second
aspect, viz. 1/3rd subsidy against the electricity tariff, he urged the
Commission to allow a standing dispensation so long as GoM pays or adjusts the
amount in advance. GoM's concern is to
avoid the time lag between the announcement of subsidy and the issue of
individual Orders by the Commission approving the modalities. MSEB have submitted that GoM should
undertake to compensate them, and that they would pass on the subsidy to
eligible consumers only after such compensation is received by MSEB.
7. According
to Exhibits A-1, A-2, B and C annexed to GoM’s Application, the subsidy against
the electricity tariff to agricultural and powerloom consumers is proposed to
be given to the same extent as in 2001-02, and to eligible small and marginal
farmers to the extent of 33.33% in line with GoM Policy since 1989, both in
respect of the financial year 2002-03.
The total amount of subsidy required is estimated to be Rs.832.99
crores, the break up of which has been indicated at para 3 above. GoM have also stated that, by GR dated
31.3.2003, Rs.711 crores due to GoM from MSEB against Electricity Duty,
inspection fees, guarantee fees, and interest on government loan have been
adjusted, leaving a shortfall of around Rs.122 crores. GoM have not indicated the time frame for
adjustment of the remaining amount.
Most of the book adjustment is of Electricity Duty. Particularly in respect of the latter, the
computation of dues from MSEB for the purposes of adjustment has been done on
an accrual basis, as was clarified during the hearing. In other words, these amounts do not
necessarily reflect in cash in hand with MSEB since shortfalls in bill recovery
would also affect the quantum of Electricity Duty actually collected. (This
problem does not arise in the case of guarantee fees, interest on Govt. loans,
etc.). Although, under the provisions
of the Electricity Regulatory Commissions (ERC) Act, 1998, GoM are entitled to
give subsidy, the manner of payment has to be determined by the
Commission. Moreover, the Electricity
Act, 2003, which came into force in June, 2003, during the pendency of these
proceedings, requires payment to be made in advance. Taking these considerations into account, the Commission directs
as follows in so far as the subsidy proposed to be given by GoM for
agricultural and powerloom consumers, and for eligible small and marginal
farmers in drought-affected areas for the financial year 2002-03 is concerned:
i)
To the extent to which the subsidy is or will
be provided by book adjustment of various dues payable by MSEB to GoM, such
adjustment shall be done on the basis of cash in hand with MSEB and not on
accrual basis. Thus, in the case of
Electricity Duty, for example, the actual amount collected by MSEB rather than
the amount recoverable should be the basis of the dues considered as being
available with MSEB for adjustment. The
total requirement should be adjusted on this basis before the subsidy can be
operationalised and reflected in the bills issued by MSEB to the eligible
consumers.
ii)
In case there is a shortfall in such
adjustment and/or actual release of grants, either because of errors in
estimation or because of the difference between earlier computations on accrual
rather than cash basis, or any other reason, it should be reflected in the
billing, and the shortfall distributed on a pro-rata basis as between the
different categories of consumers until such time as it is reduced or
eliminated. In other words, the subsidy
would be passed on to eligible consumers only in proportion to the extent to
which the total requirement is paid by GoM to MSEB by book adjustment or
financial releases.
iii)
MSEB should refund the subsidy amount
(proportionate to the extent actually received/ adjusted as above) to all
eligible consumers in the subsidised categories who have already paid their
bills.
iv)
MSEB should clearly indicate in the bill
proformae (a) the tariff determined by the Commission, (b) the amount of State
Government subsidy and the rate and period thereof, (c) the net amount payable.
8. GoM
have also sought permission to give standing orders to MSEB that, whenever
drought-affected areas are declared, the amount of subsidy at 33.33% to small
and marginal farmers as per GoM's continuing policy should be indicated by
MSEB, and only the balance should be billed to the eligible agricultural
consumers in such areas. This is
intended to obviate the need for approaching the Commission each time,
resulting in delays. During the
hearing, Secretary (Energy) suggested certain possible modalities, as minuted
in the Record of Proceedings. Under
Section 65 of the Electricity Act, 2003, GoM are required to pay the amount of
compensation to MSEB on account of such subsidy “in advance and in such manner
as may be specified.” Thus, under
Section 65 read with Sections 181 and 2 (62), the manner of such payment has to
be laid down by Regulations under the Act.
The Commission has initiated the process of formulating the Regulations,
and would consider how best to address GoM's concerns in this regard while
finalising them. Thereafter, a final
Order would be passed on GoM’s Application insofar as the plea for a standing
dispensation is concerned.
| Sd/- | Sd/- | |
| (Dr Pramod Deo) | (P. Subrahmanyam) |
|
| Member | Chairman, MERC |
|
Sd/- |
||
| (A.M. Khan) | ||
| Secretary, MERC | ||
|
||