Politics of appeasement is killing Maharashtra power utilities
The politics of appeasement of the farming community- the biggest chunk of voters, crucial to winning elections is proving as the death knell for the Maharashtra state power utilities. Overburdened with the loans, even to run its day-to-day business from the payment of the salaries and allowances to its staffers, has put the Maharashtra State Energy Distribution Company (MSEDCL)- Mahavitaran on the brink of collapse.
What’s coming as the last straw on the camel’s back is the non-recovery of arrears of agriculture pump sets and the inability of civic and local bodies to pay bills for the water supply schemes and street lights. The situation is so grim that Mahavitaran was forced to avail of loans- of Rs 25,000 Cr to meet the requirement of the working capital in the last seven years alone.
Out of the total 2.87 Cr consumers of MSEDCL, 2.15 Cr are domestic electricity customers and they use 20% of the total electricity. The number of traders is 20.75 lakh and they use 5% electricity. There are 4.51 lakh industrial consumers who consume 38% of the electricity.
Agriculture sector consume 31 percent power
In the agricultural sector, there are 43.44 lakh consumers of agricultural pumps and they consume 31% electricity. The municipal bodies and village panchayats account for 2% of electricity consumption for the 1.02 lakh street lights. The water supply schemes registered as 57,000 customers consume 3% electricity. In addition, 1.82 lakh customers are from other sectors and consume 2% electricity.
These figures show that although the number of consumers for domestic use is the highest, the highest consumption is from the industrial consumers (38 percent). On the contrary, the agriculture sector, street lights, and water supply schemes consume 35% of the power supply.
In the year 2019-20 and 2020-21, the rate of recovery was around 88 percent and 86 percent respectively. This means that the recovery was maximized by domestic, industrial, commercial users since the figures of arrears against the agricultural pump sets, public water supply, and street lights are mammoth.
Covid19 hit hard!
During the Corona outbreak from April 2020 to March 2021, the power utilities went through the worst ever phase. While a total of Rs 78,001 crore was spent on power supply during the period, the recovery was just Rs 65,220 crore. In other words, there was a difference of Rs 12,751 crore between expenditure and recovery. This increased MSEDCL debt.
Looking at the recovery rate, it can be seen that the recovery from the three types of customers- domestic, commercial, and industrial has been 93%, 96%, and 98% respectively. However, the recovery from the agricultural pumps (3%) and street lights (27%) is very low. Looking at the recovery from agricultural pump holders, it is seen that in the year 2020-21, the amount due from these consumers was Rs. 5709 Cr but just Rs 158 crore could be recovered against the current year arrears.
An inference can easily be drawn that the farmers who were consumers of agricultural pump sets were the consumers for their domestic connections as well. But they have paid their domestic power bills on time. Or else, the figures for domestic electricity bill collection would have been much less. But when it comes to paying agricultural pump set bills, the same class doesn’t prefer to pay bills on time. The reason is purely political. They are promised free power or hefty concessions. So, the feeling is that since the electricity bill was going to be waived or a huge discount was coming their way, then why should one pay it.
Vicious cycle of power at free of cost of at concessional rate
The vicious cycle of amnesty or concessions accelerated after 2003-04. Speaking at a public rally before the 2004 state Assembly elections, Shiv Sena chief Bal Thackeray announced that the farming community would be provided free power supply if his party was voted to power. At that time, the state was under Congress-NCP rule, headed by Sushilkumar Shinde. Despite the lack of financial capacity, some ministers and ruling party leaders forced the government to decide on free electricity, fearing that the votes of the farming community may shift to the Sena-BJP. Power bills with zero amount were also dispatched to win their hearts.
Soon after the elections, Vilasrao Deshmukh, who returned as the Chief Minister, sprang a surprise announcing the reversal of his predecessor’s decision. Because the financial position of the State Electricity Board was deteriorating each day. Not all election promises were meant to be fulfilled, he thundered. Even if the decision on the free power supply was reversed, the government could not resist itself from supplying power at many concessional rates to agricultural pumps and waiving arrears to keep the farmers happy.
Such decisions led the farming community to avoid paying bills assuming they would be waived off or reduced some of the other time, which is evident from the statistics of the last few years. When the BJP-led government was in power in 2015-16 the total recovery from the agriculture sector was just Rs 295 crore when the total arrears were Rs 4,155 crore. In the year 2016-17, when Rs 4,223 crores were expected, just Rs 350 Cr could be recovered. In the year 2017-18, Rs 5058 crores were to be recovered but Rs 791 crores were deposited into the kitty of the Mahavitaran. In the year 2018-19 the figures of arrears were Rs 6518 Cr but the actual realization was mere Rs 299 Cr.
Shiv Sena-led government unable to do anything
At the end of 2019, the Shiv Sena-led alliance government came to power and the target of recovery was Rs 5378 Cr. But the net collection was just Rs. 330 Cr. In 2020-21, when Rs 5709 Cr were expected, Rs 1343 crores could be recovered. Out of the total receipts of the financial year, just Rs 158 crore recovered as the arrears for the current year. For the current financial year i e 2021-22, Rs 3393 Cr are expected to be recovered, so far Rs 299 crore has been recovered till date.
The industrial and commercial sector has been hit hard due to the Coronavirus pandemic. The strict implementation of lockdown measures came as a severe blow and many of these units were forced to shut down, resulting in major revenue losses to the state power utilities.
The total arrears of agricultural pumps set in the year 2014-15 were pegged at Rs 23,224 Cr. Currently, it has reached Rs 73,879 crore in 2021-22. In the year 2020- 21, it was Rs 71,243 Cr. The Maha Vikas Aghadi (MVA) government decided to waive off Rs 10,420 Cr for the last year and the current year. Therefore, the arrears appear to be Rs 60,823 Cr in 2020-21 and Rs 63,459 Cr so far this year.
Loans for running the show
Due to this, the Mahavitaran was finding it difficult to pay monthly salaries to their staffers. The utility had to raise Rs 30,893 Cr to meet the requirements of the working capital. In the year 2014, the total debt was Rs 4,617 Cr. It means in the last seven years, around Rs 25,000 Cr has been borrowed for the working capital alone. Besides, the distribution company has raised Rs 14,547 Cr as a long-term loan to complete some of its important projects. This means that the cost of running the utility business was much higher than the capital investment. Currently, it is forced to set aside around Rs 1,500 crore per month for the repayment of loans.
The Mahavitaran was expected to pay Rs 7,097 Cr in 2014 to the two sister firms- Mahagenco and Mahatransmission- the power generation and the power transmission companies respectively.
State unable to payback on time
At the behest of the government, MSEDCL offers concessions in electricity bills to agricultural pumps, power looms, and industrial customers. The government is expected to reimburse this amount through its budgetary provisions. The figures for the year 2020-21 reveal when the government was expected to pay Rs 12,232 crore to Mahavitaran, the provision was just for Rs 8,000 crore. This has created a gap of Rs 4,300 crore.
Against this backdrop, in the meeting held on September 14, some of the ministers present came down heavily on the management of the energy department and power companies. The power utilities were criticized for buying 200 new vehicles. Meanwhile, a petition has also been filed in the Bombay High Court over the expenses incurred for booking chartered flights for the state energy minister. On this backdrop, the future of the state power utility seems uncertain.