IAU to strongly represent case before UERC
PrashantNews
People in Uttarakhand are likely to face a hefty increase in power tariffs following a recent order of an appellate authority on appeals filed by UJVN Ltd and Power Transmission Corporation of Uttarakhand Ltd. (PTCUL) in a matter of return on equity on the funding of the Maneri Bhali-II hydel project.
Experts said this increase could be between 30 to 46 percent if remedial measures are not taken by the state government to address the issue. While industrial associations claimed that the rise in the tariffs could be around 46 percent, the sources in the government said the rise should be around 30 percent only.
This situation is arising as UJVNL and PTCUL had filed appeals before the Appellate Tribunal for Electricity (APTEL) against order of the Uttarakhand Electricity Regulatory Commission (UERC) in the matter of the return on equity (RoE) on the capital infused by the state government from Power Development Fund (PDF) for Maneri Bhali-II and projects in PTCUL, said Pankaj Gupta, President of the Industries Association of Uttarakhand (IAU), a leading body of MSMEs in the state.
APTEL has given its order in favour of UJVNL stating that the RoE has to be computed on any investment made by the state government in the power project irrespective of the source from which the investment has been drawn. According to an estimate of the IAU, a capital of Rs 341.39 crores which was invested by state government in the Maneri Bhali-II as its equity will now entail payment of RoE on this amount. Since the investment belongs to past 15 years, it will involve carrying cost also. The sources said the equity can be around Rs 570 crore also when the project was being constructed.
Initial calculation shows that this amount with carrying cost will be about 3200 crores till date. Similarly very high amount will also arise in case of PTCUL.
“The correct situation is that this amounts to double taxation on consumers in Uttarakhand and the government should also intervene in this matter and must ensure that no such extra charges on electrify tariff is levied,” IAU chief Gupta said.
“We have to understand that PDF is created out of duty collected by GoU on power generation of hydel projects of the UJVNL, which is passed on to consumers through tariff, and this fund is utilized for funding of the future power generation and transmission assets. Thus, this amount, in a way, is consumers’ money and allowing RoE on the same would amount to loading the consumers twice, once for financing this equity and then for servicing the same,” Gupta said.
Any investment from PDF is, therefore, consumers contribution and should not qualify for RoE. Therefore, it would not be appropriate on the part of the regulatory authorities to allow return to UJVNL on funds provided by the state government of money recovered from consumers. Further, distinction between PDF and other cess and duties should also be made. PDF is a dedicated duty on generation of electricity recovered directly from the consumers through tariff unlike other cess/ duties/ taxes levied by the state government.
PDF was introduced by the state government in January 2004. Since then, It has been the consistent stand of the UERC since 2004 that RoE would not be given on equity invested through PDF. The Commission had given relevant findings in all the previous tariff orders till date on this point.
Looking into the grievous financial implications of this order, the IAU has decided to strongly represent the case before the UERC for public hearing on October 1.
It is also expected that the Uttarakhand government should also take stock of this difficult situation for consumers as it is trying to invite Industries to the hill state. The key points to attract industries in Uttarakhand are low electricity charges among other incentives. If this increase is implemented this then many industries looking towards Uttarakhand for investment will move to other states, Gupta said.