PSEB seeks permit to pay recycle working capital loan
Jangveer Singh
Tribune News Service

Chandigarh, May 3
The Punjab State Electricity Board (PSEB), which started in 2009-10 with an opening working capital loan of Rs 6,500 crore, aims to borrow Rs 6,500 crore and also repay Rs 6,500 crore this year and end the year with an outstanding working capital loan of Rs 6,500 crore. This jugglery will cost it Rs 780 crore in interest charges.

According to the annual revenue requirement (ARR) petition filed by the board before the Punjab State Electricity Regulatory Commission (PSERC), copies of which are available on the board’s site, the public utility company will virtually have no working capital loan at its disposal this year, as repayment will be equal to the additional loan drawn.

This state of affairs has been reached because the PSEB, instead of using the working capital loan to cover the time gap between the supply of electricity and realisation of revenue, is using it to bridge the gap between expenditure and income.

Former chief engineer Padamjit Singh disclosed that a situation in which the board had to spend Rs 780 crore as interest charges just to recycle the earlier working capital loan, is the consequence of shortsighted and expedient policy of the previous governments to run the board on borrowed funds. The engineer said even if the PSERC did not allow a part of the Rs 780 interest charges, the problem of huge accumulated market loan would remain and that a corresponding increase in tariff was necessary for any recovery to take place.

Meanwhile, the petition filed by the PSEB also makes it clear that it is on the path of accelerated financial meltdown with accumulated losses of Rs 6,980 crore in the three-year period from 2007-08 to 2009-10.

To meet its operational expenses, the board is resorting to increasing lending from financial institutions and banks. As per the ARR petition of the PSEB, the outstanding loans of the public utility have been rising from Rs 10,589 crore (2007), Rs 12,093 crore (2008), Rs 15,903 crore (2009) and Rs 19,533 crore (expected in 2010).

Corresponding to the increased loan, the component of interest on loan in the ARR has also shown an alarming trend. The interest on loan, which was Rs 858 crore in 2007-08, increased to Rs 1,207 crore in 2008-09 and Rs 1,586 crore in 2009-10.