6.30

World Bank Loan

6.30.1

The sanctioned amount of IBRD loan is US$ 350 Million, of which the transmission component is US $179 million meant for construction of EHT lines and substations (Form No.TRF-16 of BST application 2001-02). Information about receipt and payment on loan and interest thereon for the FY 1999-00 onwards with a projection for the years up to 2002-03 has been exhibited in form No.TRF-3 of RR filing of 2002-03. As on 31st of March 2001, the closing balance of IBRD loan was Rs.381.11 Crore which is expected to Rs.620.33 Crore by 31st March 2002 and Rs.787.73 Crore by the year ended 31st March 2003. The applicable rate of interest is 13% and the interest chargeable to revenue comes to Rs.61.02 Crore and Rs.92.00 Crore for the years 2001-02 and 2002-03 respectively.

6.30.2

It is notified from the soft copy submitted by the licensee that GRIDCO has invested schemes Rs.171.05 Crore as a counterpart funding for distribution projects. The same has been treated as a back to back loan from DISTCOs at the rate of 13.83%. The interest receivable from DISTCOs has been shown as income to GRIDCO in form F-37.

6.30.3

It is pertinent to mention that World Bank loan to GRIDCO is routed through Government of Orissa. State Government receives the fund from World Bank through GoI for the purpose of rehabilitation and upgradation of the power sector in Orissa in the ratio of 30 (grant):70 (loan). The loan component bears interest rate of 13% p.a. The State Government instead of treating the entire amount of IBRD funding as loan to GRIDCO, it should be treated 30% as grant and 70% as loan as per the existing terms and conditions.

6.30.4

The Commission therefore advises the Government of Orissa in exercise of its power conferred in it under Section 11 of OER Act, 1995 to treat the World Bank loan as per the original terms and condition i.e. 30% as grant and 70% as loan from the FY 2001-02 onwards.

6.30.5

Accordingly, the interest on IBRD loan for the year 2001-02 and 2002-03 are calculated and approved as Rs.45.57 Crore and Rs.64.07 Crore respectively.

6.31

Loan from HIW

6.31.1

The loan balance for HIW works including ICICI loan for construction of 400 kV line from Meramundali to Mendhasala and 220 kV line and S/s at Cuttack is Rs.69.49 Crore as on 31.3.2001 which was projected at Rs.82.54 Crore in the FY 2000-01 tariff filing vide para 6.14.8 of the BST order No.27 dt.19.01.2001. GRIDCO in its subsequent clarification stated that in the tariff filing for the FY 2000-01, the estimate of receipt of loan 2000-01 was assumed at Rs.21.00 Crore as against the actual receipt Rs.12.58 Crore in the same year. Repayment of loan amounting to Rs.4.63 Crore has been made for the year 2000-01. This is the main reason for discrepancy in the figure between the BST filing made during 2000-01 and 2001-02 for the year 2000-01.

6.31.2

As reported in TRF-3 of ARR 2002-03, the HIW loan component as on 31.03.2002 would be nil and the ICICI loan would be Rs.55.27 Crore after repayment of Rs.14.22 Crore. During 2002-03, no additional borrowing has been projected and the position of loan is likely to remain unchanged as on 31.03.2003. This loan is estimated at an average rate of interest including ICICI bill discounting at an average rate of 14% per annum.

6.31.3

Interest as projected by GRIDCO for the year 2001-02 and 2002-03 amounting to Rs.8.50 Crore and Rs.6.30 Crore respectively calculated in accordance with the para stated above (Form TRF-3 of ARR 2002-03) is hereby approved.

6.32

State Government Loan

6.32.1

GRIDCO has reported in TRF-16 of ARR 2002-03 that the loan balance from Government of Orissa as on 31 March 2001 is Rs.168.71 Crore. While GRIDCO does not propose any additional loan from Government of Orissa during 2001-02 and 2002-03 but projects a repayment of Rs.0.37 Crore and Rs.10.10 Crore during 2001-02 and 2002-03 respectively. Accordingly, the loan balance as on 31st March 2002 and 31st March 2003 has been estimated to be Rs.168.34 Crore and Rs.158.24 Crore respectively. While comparing with the figure of tariff filing FY 2000-01 it was detected that loan balance as on 31 March 2001 was Rs.185.42 Crore. GRIDCO in its subsequent clarification stated that the discrepancy in the figure between the BST filing made 2000-01 and 2001-02 is attributable to the fact that GRIDCO had assumed a loan receipt of Rs.31.71 Crore during 1999-00, which was provisional including certain adjustments. But the actual receipt of loan was only Rs.15 Crore.

6.32.2

Of the total loan of Rs.168.71 Crore, GRIDCO utilised Rs.120 Crore towards payment of energy bills to OPGC. Balance amount of Rs.48.71 Crore has been utilized for construction of transmission lines.

6.32.3

GRIDCO estimates an amount of Rs.21.84 Crore and Rs.21.88 Crore towards payment of interest on State Government loan outstanding as on 31.03.2002 and 31.03.2003 at the rate of 13% interest.

6.32.4

As regards interest on loan of Rs.120 Crore for payment to OPGC, Commission in its order 27 dated 19.01.2001 stated that interest on loan against power purchase payable are to be disallowed for the purpose of calculation of revenue requirement for the FY 2000-01.

6.32.5

Commission is aware of the fact that GRIDCO owes Rs.426.44 crore amount payable to State Government while State Government owes Rs.576.35 crore payable to GRIDCO as on 01.04.2001. The Government of Orissa and GRIDCO should take immediate appropriate action to settle the outstanding issue. Keeping this in view, the Commission does not allow any interest on this component of Rs.120 Crore for the FY 2002-03.

6.32.6

With regard to the balance of Rs.48.71 Crore of loan out of Rs.168.71 Crore, Commission advises that the State Government should defer the service of State Government loan (both principal and interest) by GRIDCO till the financial health of the GRIDCO is revived. Commission suggests that this measure is to be applicable from the FY 2002-03 since the year 2001-02 is over.

6.32.7

Accordingly, Commission approved an amount of Rs.21.84 Crore for the FY 2001-02 and nil for 2002-03 towards interest on loan from State Government

6.33

Zero Coupon Bond

As explained in para 6.4.19, the Commission has decided not to take into consideration the effect of upvaluation for the purpose of determination of tariff.

6.34

Loan from Central Government

An amount of Rs.11.26 Crore was drawn in 87-88 from Central Government for transmission network on which an interest of Rs.1.01 Crore for the FY 2001-02 payable has been calculated @ 9.25% (TRF-16). Commission approves the same. For the year 2002-03, GRIDCO has proposed an amount of Rs.1.24 Crore towards interest, although they have proposed to redeem the entire loan of Rs.11.26 Crore by the end of FY 2002-03. Commission feels that the interest projected by GRIDCO is on higher side and approves an amount of Rs.0.52 Crore payable as interest towards central Government loan for the FY 2002-03.

6.35

Loan from PFC

6.35.1

For the purpose of construction of EHT lines and sub-stations, GRIDCO estimates a loan balance of Rs.301.19 crore as on 31.03.2002 and 31.03.2003. GRIDCO in its submission at the time of public hearing, they have invested an amount of Rs.66.99 as on 31.03.99 PFC funded projects meant for distribution. The same has been treated as loan to DISTCOs @ 13.837% and the interest receivable from DISTCOs has been shown as income to GRIDCO in form No.TRF-26.

6.35.2

GRIDCO claims an amount of Rs.48.85 Crore for 2001-02 and Rs.54.30 Crore for 2002-03 towards interest on PFC loan (TRF-3 of ARR 2002-03) at an average rate of 16.04%.

6.35.3

In its financial restructuring plan of the outstanding loan from REC and PFC, GRIDCO had proposed that as these loans carried a high rate of interest and could be re-securitised at the rate 8.5% tax-free bond, the burden of higher interest, could be reduced. Accordingly, the Commission directs GRIDCO to take appropriate action for securitization of this dues for which interest for these loans are calculated at the rate 8.5% for the year 2002-03 onwards. Accordingly, Commission approves Rs.48.85 Crore and Rs.25.60 Crore towards interest for the FY 2001-02 and 2002-03 respectively.

6.36

Loan from REC

6.36.1

The position of loan taken/estimated to be taken from REC amounts to Rs.416.36 crore as on 31.03.2002 and as on 31.03.2003 (TRF-3 of ARR 2002-03). The loans are to be availed for the purpose of construction of EHT lines sub-station and rural electrification. GRIDCO during public hearing submitted a revised statement of loan (TRF-3) according to which the loan balance as on 31.03.2002 and 31.03.2003 would be Rs.393.96 Crore and Rs.347.04 Crore respectively.

6.36.2

GRIDCO claimed an amount of Rs.79.16 Crore and Rs.51.30 Crore for the FY 2001-02 and 2002-03 respectively calculated at an average intrest rate of 14.66% which was further revised at the time of public hearing to Rs.56.18 Crore and Rs.50.60 Crore for the year 2001-02 and 2002-03 respectively. The Commission in accordance with the concept of securitisation of CPSU dues approves the interest rate as 8.5% for the FY 2002-03. Accordingly, the Commission approves Rs.56.18 Crore for 2001-02 at the rate of 14.66% and Rs.31.49 Crore for the FY 2002-03 @ 8.5%.

6.37

LIC Loan

LIC loan of Rs.140.66 Crore drawn during the period from 1981 to 1996 carries an interest rate of 14% per annum. No amount has been drawn after 01.4.96 and no repayment has been done after 01.4.96. The interest on this account for the year FY 2001 was approved at Rs.28.53 Crore which includes a compound interest of Rs.12.12 Crore. During 2001-02, GRIDCO has requested to allow interest to the tune of Rs.39.53 Crore for FY 2001-02 and Rs.44.20 Crore for FY 2002-03 on a loan of Rs.140.66 Crore. The Commission cannot allow such a huge interest burden to be passed on to the tariff and GRIDCO should have taken adequate steps for prevention of penal interest at least in 2001-02. As such, the Commission approves an interest of Rs.19.69 crore chargeable to revenue for the FY 2001-02 and 2002-03 @ 14% on original loan. All attempts should be taken by GRIDCO to retire this loan by taking loans from the open market to avoid penal interest.

6.38

GRIDCO Bond

GRIDCO had issued bonds of Rs.667.56 crore during 1998-99 and subsequently Rs.113.81 Crore during 2000-01 to meet the liabilities on account of power purchase as well as to meet other working capital requirements (TRF-3, ARR 02-03). State Government guarantee is available for Rs.667.56 crore, of which interest was disallowed by the Commission in BST order dtd.19.01.2001. Now, in keeping with the objectives set out in the Ahluwalia Committee recommendation, the Commission now approves acceptance of the interest liabilities of these bonds against a tax free bond @ 8.5% p.a. Thus, this is being calculated @ 8.5% for the year 2001-02 onwards. Accordingly, Commission approves interest amount of Rs.66.20 crore and Rs.65.99 crore for the financial year 2001-02 and 2002-03 respectively.

6.39

OSEB Bonds

GRIDCO inherited public bond issued by OSEB during 1981 to 1989 to the tune of Rs.109 Crore for meeting of working capital expenses. These loans are repayable by 2008, with interest rate varying from 7.25% to 11.5%. GRIDCO in TRF-3 of ARR 2002-03 has shown an amount of Rs.4.10 Crore and Rs.5.30 Crore as interest payable for the FY 2001-02 and 2002-03 respectively, on a loan balance of Rs.34.76 Crore and Rs.30 Crore. Subsequently, GRIDCO at the time of public hearing submitted a revised figure of Rs.4.12 Crore as interest payable for the year 2002-03. As this loan pertains prior to incorporation of GRIDCO, the Commission considers the interest on this loan allowable for the purpose of revenue requirement Rs.4.10 Crore for 2001-02 and Rs.4.12 Crore for 2002-03.

6.40

Pension Trust Bond
GRIDCO has claimed an interest of Rs.18.00 Crore for the FY 2001-02 as well as 2002-03 (TRF-3 of ARR 2002-03) for pension trust fund of Rs.150.00 Crore. In the notes to the account of 1998-99, the auditors have pointed out that the provision has been kept on account of Retirement Benefit by taking into consideration the issue of Rs.150.00 Crore bonds to GRIDCO Pension Trust Bond which are yet to be issued. Rs.150.00 Crore of bonds includes Rs.119.76 Crore of pension liability allocated to DISTCOs, the interest of which is shown as interest recovered from DISTCOs in form 26 of BST 2001-02 as well as ARR 2002-03 application. Since the liability is to be discharged even after creation of the GRIDCO/DISTCOs Pension Trust Bond, the Commission allows an interest Rs.18.00 Crore per annum for the FY 2001-02 and 2002-03. Out of Rs.150.00 crore back to back arrangement covering an amount of Rs.119.76 crore are allocable to the DISTCOs business.

6.41

Short Term Loan & Cash Credit
As on 31st of March 2002, GRIDCO estimates its short term loan and cash credit balance from financial institutions will be around Rs.50.36 Crore and by 31st March 2003 it may ascend to Rs.51.16 Crore. On this account, GRIDCO claim an account of Rs.6.10 Crore for the FY 2001-02 and Rs.5.24 Crore for the FY 2002-03. The organisation faces the problem of liquidity due to non-payment of BST bills by the DISTCOs for which the Commission like the previous year approves a sum of Rs.6.10 Crore chargeable to revenue account on interest for the year 2001-02 and Rs.5.24 Crore for the FY 2002-03.

6.42

Capitalization of Interest

6.42.1

GRIDCO in its BST application in FY 02 (in form TRF-2) has projected a sum of Rs.78.12 Crore as interest during construction. Subsequently, at the time of public hearing GRIDCO submitted a revised WIP summary (TRF-2) as per which the interest capitalized would be Rs.72.26 Crore. This has been checked by the Commission with reference to the submission made in the tariff filing by GRIDCO. In view of the changed calculation made in respect of World Bank loan, the interest during construction is revised to Rs.63.58 crore. Commission approves the same.

6.42.2

For the year, 2002-03 IDC is estimated at Rs.80.00 Crore in ARR filing of 2002-03 in (TRF-2) which was subsequently revised to Rs.62.00 Crore in the GRIDCO’s submission at the time of public hearing.

6.42.3

GRIDCO in form TRF-7 of BST 2001-02 filing had also shown as interest on working capital of Rs.118.81 Crore. During the course of the hearing, Director (Finance) of GRIDCO requested to allow the expenditure for the year 2001-02 as a part of revenue requirement even though it was not exhibited in the revenue requirement application. As submitted by GRIDCO during the course of the public hearing, the position of current liability of GRIDCO is found to be Rs.638.28 Crore to the following central generators as on 28th February, 2001.

Table : 36
Power Purchase Payables
(Rs. in Crore)

Central Sector Generators

Principal outstanding

DPS outstanding

40% DPS applicable for securitisation

Total outstanding for securitisation

Securitisation @ 8.5% Tax Free Interest

NTPC

410.73

126.75

50.70

461.43

39.22

NHPC

5.05

9.87

3.95

9.00

0.76

PGCIL

11.39

-

-

11.39

0.97

NALCO

156.46

-

-

156.46

13.30

Total CPSUs payables

583.63

136.62

54.65

638.28

54.25

6.42.4

The Commission as explained earlier will take into consideration the likely impact in reduction of interest on account of securitization of PFC and REC loans @8.5% per annum and on account of reworking of interest of world bank loan treating 70% as loan and rest 30% as grant. Accordingly, IDC estimated at Rs.80 Crore will slide down to Rs.41.72 Crore for the year 2002-03. A statement of loan of GRIDCO for the year 2000-01, estimate for the year 2001-02 and 2002-03 is given in Table : 35.

Table : 35
(Rs. in Crore)

Source

Closing balances at the end of FY 00-01

Receipt during the FY 01-02

Repayment during the FY 01-02

Closing balances at the end of FY 01-02

Estimates of Receipt during FY 02-03

Estimates of Repayment during FY 02-03

Closing balances at the end of FY 02-03

LIC

140.66

-

-

140.66

-

-

140.66

Central Government

11.26

-

-

11.26

-

11.26

0

State Government

168.71

-

0.37

168.34

-

10.10

158.24

World Bank

381.11

243.00

3.78

620.33

170.80

3.40

787.73

Commercial Bank-W.C. Demand Loan

 

7.57

 

-

 

5.21

 

2.36

 

-

 

1.50

 

0.86

Short Term Loan from Banks

35.40

-

-

35.40

11.90

7.00

40.30

Cash Credit

10.00

-

-

10.00

PFC

319.03

17.85

301.19

-

-

301.19

REC

427.84

6.00

39.88

393.96

-

46.92

347.04

Public Bonds

38.54

-

3.78

34.76

-

4.76

30.00

Bonds to GoO

400.00

-

-

400.00

-

-

400.00

Bonds for Pension Trust

150.00

-

-

150.00

-

-

150.00

GRIDCO Bonds

781.37

-

4.98

776.39

-

-

776.39

HIW Loan (ICICI Bond)

69.49

5.01

19.23

55.27

-

-

55.27

IDBI Bill Discounting

0

0

0

0

0

0

Securitisation of CPSU dues

-

-

-

638.28

-

-

638.28

Less loan received from Distcos

-

718.63

-

640.94

-

-

527.39

Total

3097.27

3308.57

6.42.5

GRIDCO in its submission has stated that the interest expenses on loan will be Rs.253.35 Crore (TRF-3, ARR 2002-03, BST 2001-02) which has been further revised to Rs.236.61 Crore for 2001-02 in the submission made during the course of the hearing. This was checked at the Commission’s end. Applying necessary correction to the interest chargeable on LIC loan, this figure is revised to Rs.216.77 Crore.

6.42.6

Pursuant to the concept explained in para 6.7.6 the Commission considers allowing interest expenses on the power purchase liability of CPSU amounting to Rs.54.25 Crore for the year 2001-02.

6.42.7

After analysis of facts and figures of the preceding paragraphs, the interest expenses chargeable to revenue for the year 2001-02 is Rs.216.77 Crore against long term liabilities and Rs.54.25 Crore against conversion of new bonds totalling to Rs.271.02 Crore. After re-securitisation of old bonds of Rs.776.39 crore as on 31.03.2002 @ 8.5% p.a., and on account of treatment of World Bank loan to 30% grant and 70% loan, the interest liability works out to Rs.216.27 crore chargeable to revenue for the FY 2001-02. This is approved by the Commission.

6.42.8

In the ARR 2002-03 application, GRIDCO has estimated interest expense of Rs.267.95 Crore which was subsequently revised to Rs.284.07 Crore in its submission at the time of public hearing. The loan details furnished by GRIDCO has been analyzed in the preceding paragraphs and the Commission corrects this figure to Rs.258.85 Crore.

6.42.9

Pursuant to the concept explained in para 6.7.6 and para 6.7.7 after considering conversion of CPSUs dues and securitisation of Central Public Sector Undertakings @ 8.5%, the Commission approves provisionally the interest amount of Rs.189.84 Crore for the FY 2002-03 including interest on power purchase bonds of Rs.54.25 Crore permitted earlier for FY 2001-02. The detailed statement of interest expenses for the year 2001-02 as well as 2002-03 is given in Table : 37.

Table : 37

2001-02

2002-03

Source

GRIDCO’s proposal

Commission’s estimate (With corrective)

Commission’s estimate (Without corrective)

GRIDCO’s proposal

Commission’s estimate (With corrective)

Commission’s estimate (Without corrective)

LIC

39.53

19.69

19.69

44.20

19.69

19.69

Central Government

1.01

1.01

1.01

1.24

0.52

0.52

State Government

21.84

21.84

21.84

21.88

0

21.88

World Bank

61.02

45.57

61.02

92.00

64.07

92.00

Commercial Bank-W.C. Demand Loan

0.63

0.63

0.63

0.38

0.38

0.38

Short Term Loan from Banks

5.47

5.47

5.47

4.86

4.86

4.86

Cash Credit

PFC

49.44

49.44

49.44

54.30

25.60

54.30

REC

56.18

56.18

56.18

50.60

31.49

50.60

Public Bonds

4.10

4.10

4.10

4.12

4.12

4.12

Bonds to GoO (Zero Coupon Bond)

0.00

0.00

0.00

0.00

0.00

0.00

Bonds for Pension Trust

18.00

18.00

18.00

18.00

18.00

18.00

GRIDCO Bonds

114.19

66.20

114.19

110.90

65.99

111.90

HIW Loan (ICICI Bond)

8.50

8.50

8.50

6.30

6.30

6.30

IDBI Bill Discounting

0.00

0.00

0.00

0.00

0.00

0.00

Less interest on loan recoverable from Distcos

71.03

71.03

71.03

63.70

63.70

63.70

Less interest Capitalized

72.26

63.58

72.26

62.00

41.72

62.00

TOTAL

236.61

162.01

216.77

284.07

135.59

258.85

Securitisation of CPSU dues

54.25

54.25

54.25

54.25

54.25

54.25

TOTAL

290.86

216.27

271.02

338.32

189.84

313.10

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