6.22

Rebate for Prompt Payment from the Generators

6.22.1

The PPA between the generators and GRIDCO provides for a rebate of 2.5% on the gross power bill, if payment is made through Letter of Credit. 1% rebate on the billed amount is allowed when payment is made within 30 days. In case of payment beyond the due date, delayed payment surcharge @ 2% per month on the billed amount is payable by GRIDCO to the generators.

6.22.2

GRIDCO has proposed interest on working capital to meet the expenses in connection with payment of dues of the power bill to the generators. The Sixth Schedule to the Act, 1948, allows an amount of working capital on items other than the cost of generation and purchase of energy. The Commission is of the view that unless a reasonable amount of working capital is allowed to the licensee, it may be difficult on its part to meet the interest expenses on short term borrowings made to pay for the cost of power in time to avail the rebate and avoid delayed payment surcharge.

6.22.3

While the DISTCOs can access the security deposit of the consumers on which they do not pay any interest to the consumers, they do not pay any security deposit to GRIDCO for their power purchase. GRIDCO, therefore, does not have any resources to clear its dues in time if the DISTCOs do not make payment to GRIDCO in time. Considering the above, the Commission has decided that for the purpose of calculation of revenue requirement, the cost of power should be calculated at its gross value and not after excluding rebate. This will offset the shortfall on account of interest on working capital utilized to pay power dues which is not permitted under the Sixth Schedule of the Act, 1948.

6.22.4

GRIDCO in its FY 2002 application has requested for a pass through of an arrear dues relating to power procurement of the past period as under.

6.23

Year End Charges

6.23.1

Change in mix of generation for FY 2001

6.23.1.1

OERC approved 11011.38 MU at a purchase cost of Rs.1164.56 Crore for FY 2001 considering drawl from different Stations. The actual drawl from different Stations changed for which the cost for 11,011.38 MU becomes Rs.1224.69 Crore with the approval rate of OERC. The excess purchase cost of Rs.60.13 Crore beyond the normative level of purchase approved by the Commission for FY 2001 (due to variation of drawl from different sources) should be allowed to pass through for recovery in the Tariff FY02.

6.23.1.2

The submission of GRIDCO was examined with reference to filing ED-12. The statement indicates that the cost of Rs.1164.56 Crore for purchase of 11011.38 MU approved by OERC for 2000-01 has undergone an upward revision in cost due to departure in drawl from different generators. It is observed that GRIDCO has not been able to draw lost cost CPP power of 762.13 MU approved by OERC reportedly due to problem of ash pond in CPP of NALCO and has drawn only 346.62 MU. Likewise there has been a shortfall in drawl from OHPC old stations by 94 MU. This has necessitated drawl from costlier central power station involving additional expenditure, which has been estimated at Rs.60.13 Crore on the quantum of energy approved for the 2001-02 applying the approved rate of OERC. The Commission considers it reasonable to accept this figure as a passthrough for the revenue requirement for the year 2001-02. However, the actual figure will have to be verified by the appropriate authority during the course of auditing.

6.23.2

Increase in fixed cost of central sector NTPC stations

6.23.2.1

As per the Minutes of the Meeting (MOM) dated 09th & 10th Septemberí2001 between NTPC and GRIDCO at Bhubaneswar, revised bills amounting to Rs.42.46 Crore relating to revised fixed cost have been accepted by GRIDCO subject to approval by OERC. This amount should be allowed to pass through for recovery in the Tariff for FY 02 subject to verification by the appropriate authority during the course of auditing.

6.23.2.2

The increase in fixed cost of central sector NTPc station has been worked out on the basis of the global account prepared by EREB is accepted as a passthough requirement. However, the bills are to be duly audited and checked by the statutory auditors.

6.23.3

Increase in fixed cost of TTPS

6.23.3.1

TTPS claimed Rs.1.248 Crore for 99-00 and Rs.1.040 Crore for 00-01 towards arrear fixed charges due to revision of fixed cost taking into account the additional capitalization on account of R&M or otherwise. This amount of Rs.2.288 Crore should be allowed to pass through in the Tariff for FY 02.

6.23.3.2

This expenditure on account capitalization on account of R&M of TTPS for Rs.2.288 Crore is allowed as a passthrough in the revenue requirement of FY 2002-02.

6.23.4

Increase in fixed cost of PGCIL

6.23.4.1

PGCIL claimed Rs.3.08 Crore towards arrear transmission charge from Aprilí2000 to Decí2000 on Malda-Bongaigaon transmission line. This amount of Rs.3.08 Crore should be allowed to pass through for recovery in the Tariff FY 2002 as OERC had not approved the transmission cost for FY 2001 in BST order dated 19.01.2001 (ED 7).

6.23.4.2

It is observed from bills of PGCIL that CERC has passed interim order on the Malda-Bongaigaon feeder. As such, this claim of Rs.3.08 Crore is allowed for the purpose of pass through for the RR of 2001-02.

6.23.5

ED on auxiliary consumption of OHPC

6.23.5.1

OHPC claimed Rs.29 lakhs towards electricity duty paid for the period from Noví99 to Marí01. This amount should be allowed to pass through for recovery in the FY 2002.

6.23.5.2

This being a statutory duty levied by the Government of Orissa this is allowed as a passthrough for the RR of 2001-02.

6.24

Transmission Cost

6.24.1

The expenditure for bulk supply and transmission of energy excluding the cost of power purchase by GRIDCO is grouped under the head transmission cost.

6.24.2

The expenditure for the FY 2001-02 and FY 2002-03 as projected by GRIDCO has been carefully examined with the objective of determining expenditure that shall be considered as properly incurred as a pass through in the revenue requirement of these years. For the purpose of the determination of the prudence of expenditure, the Commission has relied on the audited accounts of GRIDCO for the year 1997-98 and accounts for the year 1998-99 duly audited by the statutory auditor submitted to the Commission.

6.24.3

During 1998-99, the distribution business from 26.11.98 to 31.3.99 was managed by the then subsidiary companies of GRIDCO, namely, NESCO, WESCO, SOUTHCO & CESCO.

6.24.4

NESCO, WESCO & SOUTHCO presently subsidiaries of BSES Ltd. have submitted their accounts for the year 1998-99 duly audited by their statutory auditors. As far as CESCO is concerned, the accounts for the year 1998-99 has been prepared by GRIDCO, audited by its auditors and handed over to CESCO for approval of their Board of Directors.

6.24.5

In accordance with Licence Condition No.7.2(d), the licensee is required to deliver to the Commission, a copy of each interim Profit & Loss Accounts not later than three months after the end of the period to which it relates and copies of the accounting statement and the Auditor’s report not later than six months after the end of the financial year to which they relate. Accordingly, the accounts for the years 1999-00 and 2000-01 are already overdue with GRIDCO.

6.24.6

The Commission being concerned about the delay in submission of accounts by GRIDCO served a show cause notice. GRIDCO appraised the Commission that due to non-finalisation of supplementary audit by CAG, the closing balance figures for 1998-99 could not be authenticated for which the account for 1999-00 and 2000-01 have also been held up.

6.24.7

GRIDCO in its submission to the Commission has stated that for the Government owned companies statutory auditors are to be appointed by the Government of India in consultation with the CAG of India. The statutory auditors on completion of their audit are to submit their reports to the Board of Directors of the company with a copy to the AG, Orissa. Once the audit report approved by the Board of Directors of the company, the same is submitted to A.G./CAG for supplementary audit. The CAG after supplementary audit passes on the same to the company. Thereafter, the company submits the same to the Commission for necessary action in terms of the Licence Condition.

6.24.8

GRIDCO further submitted that during the year 1998-99, its distribution business was handed over in the mid-year to its subsidiary companies which created difficulty in working out the opening balance of the assets, liabilities, etc. in respect of these companies for which there has been an inordinate delay in submission of audited account for the year 1998-99. GRIDCO submitted that appointment of auditors and the chain of events leads to auditing the accounts of a Government owned company being a time consuming process, the audited account for the year 1998-99 has been delayed.

6.24.9

It also further submitted that as directed by the CAG, the accounts of a subsequent year cannot be audited unless the accounts of the previous year have been finalised. Since the accounts for the year 1998-99 have not been finalised, the accounts for the years 1999-00 and 2000-01 could not be taken up.

6.24.10

GRIDCO has submitted before the Commission that they are ready with the trial balance for the years 1999-00 and 2000-01. On finalisation of the audited accounts for 1998-99, the accounts for the year 1999-00 would be submitted to the Commission by April, 2002 and for the year 2000-01 by May, 2002.

6.24.11

Though the audited accounts have not been submitted by GRIDCO, the provisional accounts prepared in the formats prescribed under tariff guidelines by the Commission have been submitted under affidavit for the purpose of calculation of revenue requirement and determination of tariff.

6.24.12

The Commission has taken note of these submissions and accordingly have determined Revenue Requirement and Tariff for the year 2001-02 and 2002-03.

6.24.13

At the same time, the Commission takes strong exception to the delay in submission of accounts as required under the terms of the Licence Conditions and directs the licensee to submit the same within the time frame committed by GRIDCO. The Commission also places on record that if any correction has to be carried out as a result of audit of their accounts the same will be reflected, after obtaining the approval of the Commission.

6.25

Employees cost

6.25.1

GRIDCO in OERC Form No.TRF-13 (2002-03 filing) has submitted various components covered under employees cost for the FY 1998-99 on the basis of audited accounts and have made projections upto the FY 2002-03. The employees cost chargeable to revenue was Rs.85.29 Crore as per the audited account for the FY 1998-99 which has been projected to go up to Rs.99.65 Crore during FY 2001-02 and Rs.115.08 Crore for the FY 2002-03. During the course of the public hearing, many objectors raised the issue of increasing expenditure on employees head in spite of reduction in the number of employees due to normal retirement and attrition. The general opinion was that there should have been a decline in employees cost which constitutes as a percentage approximately 6% of the entire revenue requirement of GRIDCO and this rise can be partially attributed to the employment of large number of Finance and HRD personnel after the creation of GRIDCO.

6.25.2

In response to rise in employees expenses, GRIDCO in its submission dtd. 30 March, 2002 stated that the employees expenses of GRIDCO as per audited account of 1998-99 was Rs.85.29 Crore. It is estimated to go up to Rs.99.65 Crore in 2001-02 and Rs.115.08 Crore in 2002-03. The estimation made by GRIDCO was on the assumption of 3% to 4% rise in basic pay and 6% to 10% hike in DA. The staff positions are 6101 as on 31.3.1999, 5883 as on 31.3.2000 and 5582 as on 31.3.2001. Though 200 to 250 employees are retiring per year the decrease in employees cost are being partly compensated by the increase in terminal benefit as well as pension liability to these retired employees. The salary and pension liability is a statutory obligation and the legitimate dues of the present and past employees cannot be reduced. The Director (Finance) of GRIDCO submitted that the number of pension holder in GRIDCO is nearly equal to the total employees on role for which GRIDCO continues to carry a heavy pension liability which is likely to increase due to further retirement.

6.25.3

In respect of the basic pay, a rise of 3% per annum over the base year has been taken into account while determining expenditure on basic salary of all the employees for the years 2001-02 as well as 2002-03.

6.25.4

GRIDCO has projected a DA rise at the rate of 10% on account of inflationary effect, which is without any valid reason as the average rate of inflation for the FY 2001-02 was 5%.

6.25.5

The rates of DA as on 1st of July 2000 was 41% which is continuing till date. In the meantime, Government of India has revised D.A. periodically which has gone up to 49% with effect from 01.01.2002.

6.25.6

However, any increase in rate of DA in future will be allowed to be recovered through tariff with retrospective effect. Keeping these observations in view, the expenses on pay and DA heads have been recalculated as indicated in Table : 30.

Table : 30

Date

Existing rate of DA

(Approved)

01.7.2000

41%

41%

01.01.2001

41%

41%

01.7.2001

41%

41%

01.01.2002

41%

41%

6.25.7

Terminal benefit : GRIDCO has claimed a sum of Rs.39.00 Crore towards discharge of its terminal obligation in the BST application for the year 2000-01 as against Rs.25.22 Crore allowed in the tariff for the year 2000-01. Objectors in general were highly critical about the exponential growth in the establishment cost including the terminal benefits to the employees. GRIDCO in its rejoinder dtd.30.3.2002 has submitted that the Commission had approved a terminal benefit of Rs.27.00 Crore for FY 01. The company inherited the pension liability of nearly 4800 employees at the time of transfer of employees to DISTCOs. The pension liabilities of these employees come, to Rs.2.20 Crore approx. per month or Rs.26.00 crore per annum. In the normal course, due to superannuation of GRIDCO employees retiring after 01.4.99 there is further addition to the requirement of terminal benefits having been granted prior to 01.4.99. The projected requirement of terminal benefit is likely to go up after the annual account of 2000-01 is finalised.

6.25.8

In the RR application for the 2002-03 in form TRF-13, GRIDCO has proposed a sum of Rs.45 Crore towards terminal benefits for the 2001-02 and Rs.50.00 Crore for the FY 2002-03. This issue also came up for discussion during public hearing in which it was clarified that the acturial variation in respect of GRIDCO’s employees was carried out by the actuarial value in 1998-99. The terminal benefits due to the employees of GRIDCO are required to be paid out of the fund created for the purpose by regular contribution from GRIDCO’s revenue account and the interest earned from that fund is meant to service the terminal benefits due to the employees. There has been decline in the interest rate which calls for a higher contribution for which the terminal benefits calculated for the year is required to be increased to meet the terminal benefits and pensionary benefits out of the fund created for the purpose.

6.25.9

The Commission could have adopted recent actuarial valuation which has not been done after 1998-99. The Commission after taking the reduction of interest rate into account considers it appropriate to allow a 10% rise per annum over the approved figure of Rs.25.22 crore for the 2000-01. Accordingly, Rs.27.74 Crore and Rs.30.52 Crore have been approved towards expenditure on terminal benefits for the year 2001-02 and 2002-03 respectively. With the above observations, the item wise expenditure chargeable to revenue comes to Rs.82.34 Crore for the FY 2001-02 and Rs.86.17 Crore for the FY 2002-03, as detailed in Table : 31.

Table : 31
Statement of Employees Cost
(Rs. in Crore)

Sl No

Particulars

Approved by Commission 2000-01

Prop. By Licensee 2001-02

Approved by Commission 2001-02

Prop. By Licensee 2002-03

Approved by Commission 2002-03

1

Salaries

37.28

39.55

38.41

41.52

39.56

2

Over time

0.01

0.01

0.01

0.01

0.01

3

Dearness Allowance

14.17

22.99

15.75

25.19

16.22

 

SUB TOTAL

51.46

62.55

54.17

66.72

55.79

4

Other Allowance

0.55

0.56

0.56

0.57

0.58

5

Bonus

0.23

0.25

0.25

0.27

0.27

6

Total Emoluments (1 to 5)

52.24

63.26

54.98

67.56

56.64

Other Staff Cost

7

Reimbursement of Medical Expenses

1.12

1.68

1.68

1.76

1.75

8

Leave Travel Concession

1.02

1.17

1.17

1.29

1.29

9

Reimbursement of HR

5.22

4.48

4.48

4.70

4.70

10

Interim Relief of Staff

0.34

0.40

0.40

0.44

0.44

11

Encashment of earned leave

-

-

-

-

-

12

Honorarium

0.08

0.09

0.09

0.09

0.09

13

Payments under Workmen Compensation Act

0.02

0.03

0.03

0.03

0.03

14

Ex-gratia

1.28

1.46

1.46

1.61

1.61

15

Other Staff Cost

0.50

0.0

0.0

0.50

0.50

16

Total Other Staff Cost (7-15)

9.58

9.31

9.31

10.42

10.42

17

Staff Welfare Expenses

0.56

0.92

0.92

1.01

1.01

18

Terminal Benefits

25.22

39.00

27.74

50.00

30.52

19

Total (6+16+17+18)

87.60

112.49

92.45

129.00

98.59

 

Less : Employees Expenses Capitalised

11.29

12.83

10.78

13.92

12.42

 

Net Employee Cost

76.31

99.65

82.34

115.08

86.17

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