A Note on Power

Generation
scenario in
Rajasthan

November 2010
 Index

1. Power
Scenario............................................................ 1
A. Installed Capacity ..................................................... 1
B. Peak Demand........................................................... 1
C. Meeting deficit in availability ...................................... 2
2. Power Requirement of XI
Plan..................................... 2
3. Capacity Addition during XI
Plan ................................. 2
4. Non Conventional Energy Source............ 3
5. Meeting Power Requirement of XII Plan-Advance
Action .................................................. 4
6. Transmission, Sub-Transmission & Distribution
Network ................................................. 5
7. Distribution
Sector....................................................... 6
a) Rural Electrification................................................... 6
Progress of Rajeev Gandhi Grameen Vidyutikaran
Yojana..................................................................... 7 b)
Mukhya Mantri Sabke Liye Vidyut Yojana..................... 8 c)
Pump Set Energization .............................................. 9 d)
Loss Reduction: Feeder Renovation Programme............ 9
8. Important Decisions Benefitting Agriculture
Consumers.................................................................
10
9. Tariff..........................................................................
10
10. Financial Restructuring Plan – Need for
updation ...... 11

CAUSES OF
CONCERN ......................................................... 13
Deteriorating financial position..........................................
13
a) Power Purchase Cost....................................................13
b) Inadequate revenue to meet cost of fuel, power purchase and
O&M expenses.........................................14 c) Increased
borrowings ...................................................14 Short Term
Loans: .....................................................14 Long Term
Loans: ......................................................14 d) Growing
Debt Servicing ...............................................14 e) Higher
commercial losses .............................................15

ISSUES REQUIRING IMMEDIATE ATTENTION OF THE

STATE GOVERNMENT................................................... 15
Government
support ....................................................15 Tariff
related issues......................................................16
Tax related
issues........................................................16
Manpower
issues .........................................................17
Miscellaneous
issues.....................................................17

Specific additional power purchase and

corresponding…….18 subsidy reimbursement by the Govt
of Rajasthan
 NOTE ON POWER SECTOR

Electricity is an essential requirement for all facets of our life. It has been
recognized as a basic human need. It is a critical infrastructure on which the socio-
economic development of the state depends. Supply of electricity at reasonable rate
to rural areas is essential for the economic development. Equally important is
availability of reliable and quality power at competitive rates to all categories of
consumers to make it affordable and enable it to exploit the tremendous potential
of employment generation apart from sustained growth in agriculture and industry.

Recognizing that electricity is one of the key drivers for rapid economic growth and
poverty alleviation, the state under the national plan has set itself the target of
providing access to all households in next five years. As per Census 2001, about
44% of the households do not have access to electricity. Hence meeting the target
of providing universal access is a daunting task requiring significant capacity
addition in generation and appropriate expansion of the transmission and
distribution network.

State Power sector is witnessing major changes. Growth of Power Sector since its
Independence has been noteworthy. However, the demand for power has been
outstripping the growth and availability. Substantial peak and energy shortages
prevail in the state. This is due to inadequacies in generation, transmission &
distribution as well as inefficient use of electricity. Very high level of technical and
commercial losses and lack of commercial approach in management of utilities has
led to unsustainable financial operations. Cross-subsidies have risen to
unsustainable levels. Inadequacy of distribution networks has been one of the
major reasons for poor quality of supply.

1.5 Electricity industry is capital-intensive having long gestation period. Resources

of power generation are unevenly dispersed across the country. Electricity is a
commodity that cannot be stored in the grid where demand and supply have to be
continuously balanced. The widely distributed and rapidly increasing demand
requirements in the state need to be met in an optimum manner.

Section 3 (1) of Electricity Act, 2003 provides an enabling framework for

accelerated and more efficient development of the power sector. The Act seeks to
encourage competition with appropriate regulatory intervention. Competition is
expected to yield efficiency gains and in turn result in availability of quality supply
of electricity to consumers at competitive rates.

The National Electricity Policy aims at laying guidelines for accelerated development
 of the power sector, providing supply of electricity to all areas and protecting
interests of consumers and other stakeholders keeping in view availability of energy
resources, technology available to exploit these resources, economics of generation
using different resources, and energy security issues.

The National Electricity Policy has been evolved in consultation with and taking into
account views of the State Governments, Central Electricity Authority (CEA),
S. No.
Central Electricity Regulatory Commission (CERC) and other stakeholders.
Particulars
Installed capacity as on 31.12.09
Pursuant to the Power Sector Reforms Act, 1999, the InstIerstwhile
RSEB was unbundled on 19.7.2000 through Govt. notification in
1
a)
the form of Transfer Scheme into five successor entities engaged
b)

2
3
a)
b)
Own Generation
State Sector Projects (RVUN) Partnership Projects
Total Own Generation (a+b)
Central Sector Projects Non Conventional Sources
Wind
Biomass
Total Non Conventional Sources (a+b)

Total (1+2+3)
7716.63 MW

Item
Unit
2009-10
2010-11
2011-12

Annual

S.No Particulars Installed Installed Remark

. capacity as capacity as
on 31.12.09 on
31.10.2010
1 Own Generation

a) State Sector Projects (RVUN) 3847.35 MW

b) Partnership Projects 972.95 MW

Total Own Generation (a+b) 4820.30 MW

Central Sector Projects 1878.18 MW

2 Non Conventional Sources

3 Wind 851.84 MW

a) Biomass 31.30 MW

b) Total Non Conventional 883.145 MW

Sources (a+b)

Total (1+2+3) 7716.63 MW

instead of one company, three independent distribution

companies, namely, JVVNL, AVVNL and JDVVNL were formed. All
the Companies are registered under the Companies Act, 1956.
Govt. had carved out a one time restructured balance sheet
(Asset–Liability) for each company after adjusting Govt. Loans,
Subvention Receivable, Reserves & Surplus, etc.

An overview of the Power Sector is given below:-

1. Power Scenario

A. Installed Capacity

The total installed generation capacity in the State is

7716.63 MW as on 31.12.2009. The breakup is as
under:
Details at Annexure– 1.

B. Peak Demand

The peak demand as recorded during December 2009 was

6573 MW.

During the year 2008-09, record supply of 38157 MU was

made to the consumers of the state with a daily average of
1045 LU/day for the whole financial year and as high as 1267
LU/day during the Rabi season. The highest consumption
recorded this year is 1401.48 LU/day on 25.12.09.
 C. Meeting deficit in availability

i) Overdrawl / unscheduled interchange (UI) is

resorted to subject to system conditions.

ii) Firm power is being purchased from Captive Power

Plants (CPP) at Rs. 6/- per kWh as per the GoR
guidelines issued for purchase of power from CPPs.

Item Uni 2009-10 2010-11 2011-12

t

Annual Energy MU 53362 57921 63072

Requirement

Peak Demand MW 8474 9197 10012

Installed Capacity MW 11298 12262 13349

Required

iii) Bilateral power is being purchased through traders

and Energy Exchange.

iv) Banking arrangements have been made with

neighbouring power utilities of neighbouring states.

2. Power Requirement of XI Plan

As per latest assessment of demand for Rajasthan, the

energy requirement, peak demand and installed capacity
required to meet the demand during the remaining XI Plan
 (FY 10-FY 12) are as below:-

As per above projections, capacity addition of 6516 MW is

required upto theRequirement
nergy end of 2011–12.
MU
53362
3. Capacity Addition in remaining XI Plan(FY 10-FY 12)
57921
63072
The year wise capacity addition in the remaining XI Plan is given
below: (In MW) Peak Demand
MW
8474
Details are placed at annexure-2.
9197
10012
tal

1.Installed Capacity Required

RVUN & SHARED
MW
11298
12262
13349

A. RVUN
Name of Sector 945.00
2009-100.00
2010-11
1860.00
2011-12
2805.00
T
B. SHARED
0.00
13.65
0.00
13.65

TOTAL (A+B)
945.00
13.65
1860.00
2818.65

2. Central sector project & allocation

374.40
110.43
96.00
580.83

3. Private sector projects

270.00
cted date of commissioning
A. 810.00
0.00
RVUN Stations
1080.00

TOTAL (1+2+3) (Excluding NES)

1589.40
934.08
1 1956.00
 250 MW

March-10
S. No.
Name of unit Total (A)
Capacity
250 MW

Exp
B.
Private generating stations

1
Jalipa- Kapurdi Lignite TPS Unit-2 by M/s RajWest Power
135 MW

March-10
Out of above, 695 MW in State sector & 135 MW in Private
sector has already been commissioned during the(B)
Total year 2009-10
(up to Dec-09. 135 MW

759 MW capacity (excluding NES) is likely to be commissioned in

C.
the remaining period of year 2009-10 as per details below:
Central Sector allocations
374 MW

Up to March-10
Additional capacity of 211 MW is expected from NES
Projects in the year 2009-10. Around 1000
Total (C) MW is also
likely to be added from NES Projects during FY-11 and FY-
374 MW
12.

Hopefully, the State shall be self sufficient in power in the

coming years with the commissioning
Totalof various projects.
(A+B+C)
759 MW
4. Non Conventional Energy Sources

The State Government has issued various policies for

promoting the establishment of power plants based on
Year
imum percentage of energy to be procured during the year
Non Conventional Energy Wind
Maximum capacity for execution of PPA by
Sources.
the end of the year MW limit (at 22% CUF)
Minimum percentage of energy to be procured during the year
The RERC has specified Biomass the year wise minimum
Maximum capacity for execution of PPA by the end
percentage of energy and maximum of the year MW limit
capacity for(at 80% PLF)
execution
2009-10 Mi
of PPA by Discoms in respect of power from Wind and Bio
6.0%
mass sources as given 1415 below:
MW
1.45%

153 MW
2010-11
6.75%
1639 MW
1.75%

183 MW
2011-12
7.50%
1890 MW
2.00%

214 MW

Case-I (site any wher

 So far, wind generating plants of total installed capacity of
851.84 MW and 3 Biomass based power plants of total
capacity of 31.3 MW have been commissioned up to Dec.
09. About 328 MW of wind power plants are scheduled to
be commissioned in current financial year out of which 117
MW has already been commissioned.

However, power from Wind sources is infirm power and

cannot be scheduled due to its unpredictable nature.
Further, most of the wind potential is in the western
region of the state which itself is far from the load centre.
Therefore, a long transmission system is required to
evacuate this large installed capacity. As per direction of
RERC, 400 kV transmission system with two 400 kV GSSs
at Barmer and Jaisalmer have been taken up. These
projects are presently under execution and are likely to be
completed by March, 2010.

The State has vast potential for solar power generation in

Western part of the State. MNES has allocated 10 MW
capacity of solar plant capacity for each State for which
they will provide generation subsidy upto Rs. 12 per unit
against estimated generation cost of Rs. 15 per unit. RERC
has fixed a tariff of Rs.
15.78 per unit for solar power plants to be set up under
above promotional scheme. They have further set a target
of 50 MW of solar power plants for which tariff is to be
determined by RERC on cost plus basis.

5. Meeting Power Requirement of XII Plan-Advance

Action

As per latest assessment, the peak demand for Rajasthan

will be about 16000 MW by the end of 12 plan (March-
th

2017). Advance action has been taken to meet this

demand. The proposed capacity addition planned through
various projects is given below.

a) New projects of capacity 2x660 MW each at Chhabra &

Suratgarh and 2x125 MW at Giral are sanctioned in
State Sector for which initial activities like allotment of
water & land and appointment of Technical Consultant
has been completed. RVUN has also initiated activities
for obtaining various statutory clearances, etc.

In addition to above, looking to the rapid increase in

power demand, in-principal approval has been
accorded by state government for additional generation
capacity of 4780 MW for the following projects:-

i) STPS unit-9 &10 2x660 MW ii) Ramgarh Ex. Stage IV

160 MW iii) Kalisind unit-3 & 4 2x660 MW
 in India)
2000 MW
1000 MW round the year plus 1000 MW for six months

Case-2
1320 MW
2x 660 MW at Banswara

(site specific)
iv) Dholpur Ex. Stage-II 330 MW v) Keshoraipatan
70 MW
GTPP 330
1x70 MW at MW (Private Sector) vi) Banswara TPP
Gurha
2x660 MW

b) RERC
S. No.
has approved procurement of 2390 MW power round
the
Particular and additional 1000 MW during peak months (i.e.
year
Oct. to Mar.) from private sector projects through
competitive bidding process as per GoI guidelines (Case 1 &
Case 2) as under :-

M/s PFC have been retained as Consultant to assist in

bid processing of the above projects.

Under case-I bids has been opened and LoI issued to

M/s Adani in Dec.-09 for procurement of 1200 MW.

c) Agreements have already been signed for purchase of

1950 MW power from Ultra Mega Power Projects
being set up in the Country. Allocation of another 550
MW is expected to be finalized in the near future
(Annexure-3).

d) In addition to that 1175 MW allocation is likely to be

added through Central Sector Projects in XII plan.

e) The State Government is also vigorously pursuing the

establishment of a Nuclear Power Station in Banswara
where the site has already been selected by the Site
Selection Committee of NPCIL.

6. Transmission, Sub-Transmission & Distribution

Network

The State has developed sufficient transmission, sub-

transmission and distribution network with 356 Nos. EHV
sub-stations, 3082 nos. 33 kV sub-stations and 600879
nos. of 11/.4 kV sub-stations to cater to the load demand
in the different areas of the State.
To meet the annual growth, adequate strengthening of the
transmission and distribution system is being done
annually on a regular basis for which sufficient plan funds
have been allocated.
 2009-10
2010-11
2011-12

8
(ckt. km) 400 kV S/s (Nos/MVA) 400 kV Line (ckt. km) 220 kV S/s (Nos/MVA) 220 kV Line (ckt. km) 132 kV S/s (Nos/MVA) 132 kV Li
3/945500 5/500500 15/425350 750
2/630 750 8/800 600 20/550 500 1200
450 1/630 800 10/1100 700 20/600 550 2000
The transmission network extension planned is as under:

It is also proposed to construct 180 nos. 33 kV Sub-

stations during each financial year.

With the above extension and augmentation, the

transmission system shall be able to easily evacuate new
generating capacities & meet the projected peak demand
by the end of 2011–12.

As a step towards introducing new technology, four Gas

Insulated Sub Stations (GIS) are being constructed in
Jaipur. EHV Sub Stations are being computerized.
Supervisory Control and Data Acquisition (SCADA) and
automation are also being introduced at a number of EHV
Sub Stations.

7. Distribution Sector

a) Rural Electrification

The definition of an Electrified Village prevailing prior to

Feb. 2004 was –

“A village will be deemed to be electrified if the electricity is

used in the inhabited locality, within the revenue boundary of
the village, for any purpose whatsoever.”

According to this definition 38515 villages (96.75%)

(out of 39810 villages, as per census 1991) were
considered as electrified as on 31.03.2004.
The new definition of an Electrified Village prescribed by GoI
w.e.f. 2004-05 is as under:

“A village would be declared as electrified if:

(i) The number of households electrified should be at least 10%

of the total number of households in the village,

(ii) Basic infrastructure such as distribution transformer and

distribution lines are provided in the inhabited locality as well as
the dalit basti/hamlet where it exists. (For electrification through
Non-Conventional Energy Sources, a distribution transformer
may not be necessary), and

(iii) Electricity is provided to public places likes schools,

panchayat offices, health centres, dispensaries,
community centres, etc.”

As per census of 2001, the total number of villages in Rajasthan

is 41,353 out of which 1600 villages are either unpopulated or in
forest/ firing range. Thus 39,753 villages are eligible for
electrification.

As a consequence of the new definition, a review and analysis of

the electrified villages was done during 2005-06. It was found
after the analysis that only 25,685 villages fulfilled the definition
of electrification, which is only 64.6% of the villages. Balance
14,068 villages did not qualify as electrified as per the new
definition. Out of these, 9,147 villages were included in the Rajiv
Gandhi Grameen Vidyutikaran Yojana (RGGVY) for intensive
electrification. The balance 3,681 villages declared as de-
electrified and 808 un-electrified villages (total 4,489 villages)
were included in RGGVY for electrification.

As on 31.11.2009, 2,247 out of 4,489 un-electrified / de-

electrified villages have been electrified and 4104 out of 9,147
villages have been intensive electrified. Thus, 31,879 villages
(80.04%) stand electrified as per new definition.

Progress of Rajeev Gandhi Grameen Vidyutikaran Yojana

40 schemes have been sanctioned under RGGVY, the total cost
of which is Rs.1,307.15 Cr. 25 schemes were sanctioned in Xth
Plan (prior to March 2008) at a total cost of Rs.505.29 Cr. 15
schemes were sanctioned in the XIth Plan (March 2008) at a
total cost of Rs.801.86 Cr. Details are available at Annexure –
 4.

Initially, only Dhanies having population more than 300 were

covered in RGGVY. Now, Dhanies having population more
than 100 have been included in RGGVY. 18 supplementary
schemes covering 10,558 Dhanies have been prepared and
submitted for sanction. Another 15 supplementary schemes
(7 of PGCIL) will be submitted after getting sanction of
pending schemes.

Following three issues are pending for settlement with the

GoR/ GoI:

i) As per guidelines of RGGVY, connections to BPL families are

to be given free of cost and 100% grant is provided by
REC. However, the sanction granted is for 90% grant
and 10% loan. This needs to be revised as per RGGVY
guidelines.

ii) Franchisees- Feeder Renovation Progamme is being

executed to bring down T&D losses up to 20%. Since
the collection efficiency is around 99.5%, Rajasthan
should be considered for exemption from franchisee
requirement. Reference has been made to GoR by the
Chairman, Discoms.

iii) Tax exemption-RGGVY Schemes should be exempted from

State or local taxes which are not reimbursable as
grant. Reference has been made to GoR by the
Chairman, Discoms.

b) Mukhya Mantri Sabke Liye Vidyut Yojana

Dhanies with population less than 100 and not covered under
RGGVY have been included in this scheme for electrification
with following eligibility criteria:

o Group of applicants
•4 applicants for applications pending on 31.3.08
•For applications received after 31.3.08
 •6 applicants in ST/ Desert area
•10 applicants in others cases
o Group located within 1 km from existing 11 kV network
o LT line not to exceed 1 km
o 20% relaxation in 11 kV & LT lines for applications pending on
1.3.08
o Cost of scheme not to exceed Rs. 2.5 lac for a group
o Priority to Basties with population below 100 and to the
groups of more applicants
o Fee
•Non-refundable Application fee- Rs. 200
•Charges per connection- Rs. 3500
 So far electrification of 12520 Dhanies has been sanctioned.
5049 Dhanies have been electrified and 38663 domestic
connections have been released by Nov, 09.

c) Pump Set Energization

During the period 1998-2003, 1,11,777 connections (average

22,355 per year) were released. During the period 2003-08,
1,85,893 agriculture pump sets (average 37,178 per year)
have been energized.

As per the decision taken by the Govt., entire pendency of

agriculture connections upto Dec, 2007 is to be desolved
during the FY 09-10. Accordingly, around 51,971 demand
notices were issued in first phase in Apr,09 and balance
demand notes will be issued in Feb.10.

51098 no. agriculture connections have been released in

current financial year 2009-10.The progress of release of
agriculture connections is available at Annexure– 5.

d) Loss Reduction: Feeder Renovation Programme

With the slogan “Electricity Saved is Electricity Generated”

the distribution sector has embarked on a Feeder Renovation
Programme at a total cost of Rs. 3500 Cr. Out of 8850
feeders covered in this programme, 7618 feeders (86.08 %)
have been renovated. The losses on these feeders are now
less than 20%. All electrified 36494 villages on the renovated
feeders are getting domestic supply at par with nearby urban
area.

The above efforts have resulted in a continuous decline in the

distribution losses. The distribution losses have come down to
26.76 % at the end of 2008-09 against 40.22% in 2005-06
when the Feeder Renovation Programme was introduced.
There has been a reduction of 13.46% in the last 3 years.
(Annexure– 6).

Besides loss reduction, this programme has benefitted the

rural consumers by improvement in the supply voltage and
providing continuous supply in the peak load hours. It has
also resulted in reduction in the burning rate of distribution
transformers. This programme has been admired by all the
Central Govt. Agencies and neighbouring states.
8. Important Decisions Benefitting Agriculture Consumers

The State Government has taken a number of decisions

benefiting the 8 lacs agriculture consumers.

a) The Govt. is bearing a financial burden of Rs. 242

Cr. every year by absorbing the increase in the
agriculture tariff decided by RERC. The Government
has decided not to increase the agriculture tariff
upto 2010. Minimum charges are not being
recovered from agriculture consumers in the
metered category.

b) All special category agriculture connections released

up to
31.3.08 (not getting 3 phase supply at par with
nearby urban area) have been converted into
general category agriculture connections, thus
benefiting thousands of farmers.

c) The time period for reconnection of disconnected

agriculture connections has been increased from 5
years to 15 years.

d) Priority to be given to those who has applied for drip

or sprinkler irrigation system.

9. Tariff

Prior to the unbundling of the erstwhile Rajasthan State

Electricity Board, the tariff rates as were applicable w.e.f.
the billing month of July 1997 were revised w.e.f. the
billing month of Nov.1999. The increase in the tariff rates
due to this revision was 16.8% on an average basis.

After the unbundling of the erstwhile RSEB, the first tariff

petition was filed in 2000 by the Distribution Companies
before RERC, being the competent authority to sanction
revision in tariff. RERC issued tariff order on 24.3.01
revising tariff of various categories
•the billing month of May 2001. This tariff revision entailed a
hike of 15.5% on an average basis over the rates applicable
•the billing month of Nov.1999.

Subsequently, the second tariff petition was filed by

Discoms with the Regulatory Commission which issued
tariff order on 17.12.2004, revising tariff of various
categories w.e.f. the billing month of Feb.2005. The
average tariff hike was 11.48%.

The State Government bore the burden of hike in tariff

from
1.1.05 to 30.4.05 for domestic and agriculture categories.
An amount Rs. 185 Cr. as subsidy for four months was
provided.
 The State Government allowed concessional tariff to small
domestic and agriculture consumers w.e.f. 1.4.2005, and to
Gaushalas (half the Domestic tariff instead of Non-Domestic
tariff) w.e.f. 1.7.2005.

The effective tariff to subsidised categories of consumers, after

accounting for subsidy is indicated at Annexure-7. The effective
hike was 7% only. Subsidy of Rs. 307 Cr. in 2007-08 was
provided by the State Govt. for the purpose.

A statement indicating category-wise tariff for various categories

w.e.f. July, 1997 and the percentage increase w.r.t. tariff in the
year 1999, 2001 and 2005 is enclosed at Annexure-8.

An abstract indicating the relief allowed to the metered

Position
agriculture consumers towards minimum charges which is
1 2 3 45 67 8
reimbursable
Domestic Non Domestic Agriculture Smallby the state
Industries government
Medium industriesisLarge
given at Annexure-
Industries 8A. lighting Mixed
Public Street
7th 11th 10th 10th 9th 7th 5th 10th
The tariff of Rajasthan is neither very high nor very low vis-à-vis
other States.
S. No.
Partic The current tariff of Rajasthan stands at following places
category-wise in comparison to other States:

A detailed comparison is enclosed at Annexure-9.

10. Financial Restructuring Plan – Need for Updation

The updated Financial Restructuring Plan (FRP) issued in

Nov. 05 covered turnaround strategies, financial
projections, commitments from the companies in the form
of business plan, reforms, transitional period support to be
provided by the Government, sensitivity analysis of key
parameters affecting turnaround plan and lastly the levels
of investments to be undertaken in Generation,
Transmission and Distribution activities. The subsequent
directions of the Government broadly covered following
programmes/ milestones to be achieved by the power
companies:
1. Distribution companies will
a. Reduce AT&C / T&D losses by aggressive implementation of
Feeder Renovation Programme in a time bound manner.
b. Work out the action plan for reducing the distribution losses
to around 20% by 2008-09.
c. Obtain the approval of RERC for Power Purchases and Fuel
Cost Adjustment Formula.
d. Effectively implement RGGVY and reduce the gap between the
cost of power supply to villages and the cost recovered as
additional revenue.
e. Achieve level of 50% of the cost of supply in respect of
Agriculture tariff by 2011-12.

2. RVUN shall
a. Attempt new joint ventures for setting up generating stations.
b. Move towards equity divesture of State generating Units.

The power companies have earnestly taken up all projects/

programmes/ schemes and the work done/ progress achieved
has already been described in the foregoing part of this note.
Despite the fact that improvements have been made, there are
various factors which have rendered the road map and
milestones of the turnaround strategy unachievable. A few of the
potential reasons are as under:
1The power requirement has increased steeply as compared to
the projections made in the FRP.
2The cost of power purchase has also increased significantly on
account of meeting additional power supply requirement through
Bilateral and UI sources. The cost of such power was Rs. 6.73 /
unit during 2007-08, Rs. 7.64 / unit during 2008-09 and is Rs.
7.29 / unit during 2008-09 whereas the average cost of power
generation from own units and CPSUs is around Rs. 2.50 / unit.
3Slippage in the commissioning of state generating plants, due
to which additional power has to be purchased.
4Companies have to resort to high level of short term loans to
meet the additional power purchase costs.
5During last three years, the level of interest rates has shown
upward increasing trend and has increased from 200 to 300
basis points in the last couple of years.

In light of the above, it is felt that the present Financial

Restructuring Plan has lost its applicability and relevance in the
present scenario and therefore needs in-depth review and
updation.
CAUSES OF CONCERN

Deteriorating financial position–

Though the govt. support in the shape of equity contribution,

subsidy, interest free loan etc. has increased over the years as is
evident from Annexure-10, on the revenue side, the financial
position of the companies is being adversely affected on account
of the following:

a) Purchase of power on very high cost say Rs. 7.64 per unit to
meet the demand particularly in Rabi season against
nominal subsidy from the Govt. on this account.

b) Increase in other expenditures due to hike in uncontrollable

costs like coal/fuel cost, freight, interest and finance
charges and establishment cost (due to implementation of
6 pay commission report at par with GoR).
th

c) Unprecedent increased level of incremental short term

borrowing during 2007-08 (Rs. 3189 Cr.) and 2008-09 (Rs
3807 Cr.) by Discoms to meet this higher power purchase
cost from bilateral, UI and energy exchange sources, which
has not only exhausted the capacity of Discoms in further
raising the funds for power purchase but resulted significant
increase in interest liability which is serious cause of
concern.

(d) Increased hours(7 Hrs.) of supply to agriculture.

The above issues are elaborated below:

a) Power Purchase Cost

The quantum of power purchase in terms of units as well

as total power purchase cost has been increasing year
after year details of which are given at Annexure- 11.

lars
2006-07
2007-08 Prov
 2009-10 BE
1
Revenue by sale of Power without other income
6802
7765
8240

9414
2
Power purchase
7072
9743
12928

13680
3
O&M expenses
558
676
b) Inadequate revenue 1649
to meet cost of fuel, power
purchase and O&M expenses
1716
4
Total (2+3) (Figures in
7603 Rs.Cr.)
10419
14577
The above table indicates that the revenue is not even
enough to meet the power
15396purchase and O&M costs. Other
payments (interest and repayment of principal) are being
discharged through short term borrowings which is a
Financial
cause of concern.

c) Increased borrowings

Short Term Loans: Short Term Loans have been

resorted to by the power sector to cover its revenue deficit
and meet repayment obligations against past loans. Due
to increased deficit year after year, the level of short term
loans is on an increasing trend. Details are at Annexure–
12.

Long Term Loans: The position of long term loans is

given at Annexure – 13A and position of capital
expenditure is given at Annexure – 13 B.

The loans can be wiped off only when the sector turns
around and dividend / divestment proceeds as and when
applicable are ploughed back by Govt. as subsidy /
interest free loans. As long as there are no defaults in
meeting its debt obligations, it is hoped that the
companies shall continue to avail fresh loans from banks /
FIs. However, of late, looking to the current recession in
the economy, some banks have not been able to disburse
the funds even after sanctioning and documentation of the
loan. In such a situation, any default or refusal by the
banks / FIs to provide loans to the companies may result
into financial crisis seriously affecting the credibility of the
companies to obtain loans from financial market.
d) Growing Debt Servicing
Due to higher level of capital project operation and
increase in short term loans for purchase of high cost
power, the Debt Servicing obligations and interest
liabilities are on an increasing trend. The details are given
at Annexure – 14.
 Year
Revenue
Expenditure

Deficit
2001-02
4619
5910

1291
2002-03
4774
6356

1582
2003-04
4945
6699
e) Higher commercial losses
1754
2004-05
On account of high cost power purchase and other
5431
expenses, the commercial losses have increased year after
7445
year.
2014
2005-06
The commercial losses of the companies were under
control at around Rs. 17006538
Cr. upto 2006-07 despite high
8167
levels of supply to agriculture consumers. However, during
the year 2007-08, the figure1629 increased by around Rs.
2000 Cr. on account of high cost power purchase and high
2006-07
7072
interest burden. The details are as under:
8813

1741 (Figure
2007-08(prov.) s in
8080 Rs.Cr.)
11715

ISSUES REQUIRING IMMEDIATE

3635 ATTENTION OF THE
STATE GOVERNMENT 2008-09 (RE)
8555
16583
Government support
8028
• Reimbursement, in the form2009-10
of subsidy,
(LE) of cost of additional
10355
power being purchased during FY 2008-09 from bilateral and UI
20555
sources.
•o Govt. should provide subsidy
10200 of Rs 2254.25 crore
for additional power purchase made in April to Dec., 09
through Bilateral/ OD/IEX at high cost (Average Rs
9/- per unit) to meet adequate requirement of power
to all sector.
•o Additional power worth Rs. 4184 Cr. for arranging 64,327
LU being purchased from bilateral & UI sources/IEX. During
200910 only Rs 170 crore has been released as
interest free loan. Against heavy burden of Rs 4184
crore Govt. should atleast reimburse Rs 2254.25 crore.
•o Adequate government support to distribution companies
to the extent of at least 30% to 40% of additional power
purchase is highly desirable.
•Enhancement of the equity provision to the extent of 25% to
30% of the plan expenditure for transmission and distribution
companies as per prevalent norms of financing.
•Regulating supply of power within availability and the capacity
to afford so as to keep the power purchase cost within the ambit
of affordability.
•Conversion of interest free loan of past year into subsidy so as
to make the balance sheet of the distribution companies
bankable.
Tariff related issues

•Permission to file the tariff petition for the year 2009-10.

•Discoms be allowed to file Power Purchase Fuel Cost

Adjustment (PPFCA) Formula before RERC.

•Recovery of power purchase and fuel cost for the quarter

ended Dec.07 and March 08 as approved by RERC. The
estimated recovery for two quarters is around Rs. 300
Crs.

•RERC may also be requested at government level to

allow recovery of PPFCA for the year 2008-09.also, as
decided by RERC suo moto for last two quarters of 2007-
08. This will provide a relief of atleast Rs 1000 crore to
Distribution Companies for the year 2008-09 and more
than Rs. 1250 crore during 2009-10.

•Restoration of recovery of minimum charges and recovery of

the arrears in suitable installments.

Tax related issues

•Non levy of VAT in respect of exchange of material between/

amongst the sister companies of the erstwhile RSEB.

•Levy of concessional rate of VAT at 4% in respect of Turnkey

contracts where contractors are procuring goods on behalf of
generation, transmission and distribution companies.

•Exemption of WCT on the Turnkey contracts awarded by power

companies particularly when material portion is distinctly
identified and VAT/CST paid.

•To develop mechanism for refund of previously deposited WCT

on Turnkey contracts by power companies.

•STAMP DUTY: Stamp duty on raising loan by power

companies should be exempted. It simply adds to the cost
of borrowing (liability Rs. 9.14 crore)
Manpower issues

• Revision of strength of Revenue Sub-division linking it to be

consumer base. No Revenue Sub-division should have more
than 10000 consumers if quality service is to be provided.
Similarly requirement of engineers for quality control has to
be considered.

Miscellaneous issues

•Govt. to disinvest its share in the newly formed generation

companies (Giral, Dholpur, etc.) and divestment proceeds to be
provided to the distribution companies so as to reduce their debt
obligation and other liabilities.
•• Recovery of outstanding dues pending against Nagar Nigam,
other local bodies, Government and Police offices.

•o Government may consider releasing this money by diverting

the grant by FD to Discoms against their outstanding dues
instead of releasing the same to the respective Nagar
Nigam/Local Bodies/ Government and Police Offices.

•Immediate reimbursement of Sick Industries claims (Rs.

45.13 Cr.) to meet out their adverse cash flow.

•Reimbursement against the loss suffered by the power

companies against hail-storms and pala (Rs. 2.12 Cr.).
 Specific additional power purchase and corresponding
subsidy
reimbursement by the Government of Rajasthan

In the meeting taken by the Hon’ble Minister of Energy,

GoR to review the power supply position and to decide the
quantum of additional power purchases to be made during the
current financial year to meet the demand — supply gap of the
first five months i.e. April, May, June, July & August 2009 due to
abnormally high heat and during Rabi Season on account of gap
in the availability of power and the requirement of power to
meet the supply to Agriculture Sector during the agreed hourly
blocks. It was decided in the presence of Pr. Secretary to CM
and Energy, Secretary Finance(Revenue), CMDs/MDs and the
other Sr. Officers of the Power Companies, that the adequate
power should be purchased to meet the demand without power
cut and the government should bear the burden of such
additional power being purchased on the high cost. It was
agreed that additional power purchase cost burden of Rs 3/- per
unit may be borne by the Distribution Companies and the
remaining burden(over Rs 3/- per unit) should be reimbursed by
the Government of Rajasthan. The following was decided in the
presence of the Hon’ble Minister of Energy, GoR(Annexure-’15‘).

1. The Energy Department should immediately request the

Finance Department to release the subsidy of Rs 1071.03
crores for the month of April, May, June, July & August 2009
on account of high cost of additional power purchase made to
meet the demand — supply gap.
2. To meet the daily gap ranging between 160 L.U. per day to
230
• per day from October,2009 to March,2010 i.e. during Rabi
Season the additional power purchase amounting to 44707
•amounting to Rs 3262.93 crores may be made and for which
the necessary advance arrangement should be made. Out of
total financial burden of Rs 3262.93 crores for additional
power purchase the financial impact of Rs 1341.19 crores
may be borne by the Distribution Companies (Upto Rs 3/- per
unit) and the balance Rs 1921.74 crores (say Rs 1920 crores)
may be reimbursed by the Government of Rajasthan as a
subsidy.
 •3. It was decided that the Finance Department may be
requested to make provision of subsidy of nearly Rs 1700
crores for additional power purchase during the Rabi Season
which may be released from October, 2009 to March, 2010
on monthly basis to the Distribution Companies (JWNL,
AVVNL, Jd.VVNL) in the ratio of the 38:31:31. The position of
requirement however may be reviewed further in the month
of February,10 as per the actuals obtaining.
•4. In case the grant of subsidy is not considered:
•(a) It may be difficult to raise further loans for additional power
purchase as the Balance Sheet of Distribution Companies may
become unbankable due to unprecidently high level of
outstanding short term borrowings (Rs 17639 crores approx. as
on 31.12.09)
•(b) The projected deficit of Rs 8308.93 crores during 2009-2010
will further sharply increase by Rs 2254.25 crores at the end of
current financial year.