PDD’s irregular payments adversely impacting financial health of SPDC

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Feb15: Notwithstanding the repeated directives of the Jammu and Kashmir State Electricity Regulatory Commission (JKSERC), the Power Development Department is not making regular payments on account of energy purchased from the State Power Development Corporation and this is adversely impacting the financial health of the Corporation with arrears having crossed Rs 2500 crore.
Official sources told that Jammu and Kashmir State Power Development Corporation is raising the bills in respect of energy sold in accordance with Tariff Order/Power Purchase Agreement to the Power Development Department.
Every year the Corporation, in its Annual Revenue Requirement and Tariff Petition before the SERC is highlighting the issue of irregular payment of Energy Bills by the Power Development Department and every year the Electricity Regulatory Commission is issuing directives to those at the helm of affairs in the Power Development Department for making regular payments and clearing the arrears so that Corporation doesn’t face any financial crisis.
However, the situation has not improved till date and Power Development Department is still irregular in making the payments, sources said, adding the payments are not only intermittent but meager as well and this has resulted in accumulation of huge arrears and subsequently affected the cash flow of the Corporation thereby impacting its financial health.
They disclosed that the total arrears on account of energy charges up to March 31, 2015 have touched Rs 2519 crore after adjustment of surcharge and PDD arrears. “On one side the expenses allowed as per the regulations are insufficient to cover the Operation and Maintenance expenses and on the other side the Corporation is forced to make huge investment towards capital expenses to keep the power houses in working condition. Hence the nonpayment of Energy Bills on the part of PDD is causing cash flow problems”, sources added.
The Board of Directors of State Power Development Corporation in its 70th meeting had resolved to take required action to make the necessary adjustments in the books of accounts for setting off the receivable outstanding as on March 31, 2014 from Power Development Department amounting to Rs 1987.37 crore with the plan funds received from the State Government as on March ending 2014 amounting Rs 3406 crore and conversion of remaining grants of Rs 1419.47 crore into State equity contribution to JKSPDC.
However, the Board resolution could not be acted upon as the Finance Department asked for discussion in the matter, which is still being pursued, sources informed.
It is pertinent to mention here that the entire quantity of electricity generated by the Hydroelectric Projects under JKSPDC is being sold within the State to Power Development Department except for Baglihar Hydroelectric Project where 50% of the generation is sold to PDD and balance 50% is sold through Power Trading Corporation to meet the lenders requirement.
“This clearly indicates that Power Development Corporation is largely dependent upon the payments from the Power Development Department for meeting its expenses of different nature”, sources said.
Meanwhile, the J&K State Power Development Corporation has yet not come up with the viability study of the existing power projects.
This was directed by the Electricity Regulatory Commission in its order for the financial year 2015-16 to determine the viability of the existing projects by analyzing the financial inputs and outputs, strengths, weaknesses, opportunities, threats, risks and suggest strategy to improve the profitability of the projects.
Though the SERC had stressed for submission of report in this regard at the time of presenting Tariff Petition for 2016-17 financial year, the Corporation has failed to meet the deadline although it has submitted the Tariff Petition some days back.
“To enable the viability studies of existing power projects, a committee was constituted under the chairmanship of the Chief Engineer (Generation) Kashmir with SGM (Electrical) and SGM (Civil) as its members”, sources said, adding “despite lapse of one year the committee is still in the process of formulating a report on the issue and no time-frame has been specified to meet this directive of the Commission”.
Moreover, the Power Development Corporation has yet not realized its Corporate Social Responsibility, which is evident from the fact that it has not come up with draft policy in this regard as directed by the Electricity Regulatory Commission.
“The Corporation is still in the process of identifying social needs where it can take initiatives under the Corporate Social Responsibility”, sources said.

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