Maharashtra demands Centre Rs 10,000 cr to bail out MahaVitaran

The Maharashtra government has demanded a Rs 10,000 crore bailout package from the Centre for MahaVitaran, the state power supply company.

"The Covid-19 pandemic has worsened financial health of the MahaVitaran which now needs financial breather worth Rs 10,000 crore or which it would slip into a coma, warns state energy minister Dr. Nitin Raut.

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In a letter sent today to Union Energy Minister R K Singh, Dr. Raut had informed that MahaVitaran had incurred huge financial losses due to the Covid-19 pandemic and was facing a precarious financial situation and demanded immediate assistance of Rs 10000 crore to bail out and to overcome the liquidity crunch.

He has said due to Covid-19, MahaVitaran which was the largest distribution company of India, was grappling with acute fund shortage. The lockdown period continued for almost 3 months and it still continued in major parts of Maharashtra.

He has pointed out that during the lockdown period industrial and commercial consumption reached the bottom.

The industrial and commercial consumption which amounted to 60 percent of the revenue could not get realised during the period which put MahaVitaran in a precarious financial condition.

The industrial and commercial consumption was the main source of providing subsidized rates to domestic and agriculture consumers, drop in its sale added to the financial woes of the MahaVitaran as the domestic and agriculture consumption continued unabated. Rather domestic consumption showed a rising trend during the summer due to heat and work from home, he added.

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Almost all of the industrial and commercial consumption stopped during the lockdown period. All the consumers were given a time extension to pay their electricity bills. Thus, the realization of revenue almost halted in April and May; whereas, the power purchase costs (mainly fixed), staff salaries, tax liability were not reduced.

As a result, MahaVitaran was facing unprecedented Cash Crunch and it’s been extremely difficult to clear the payments of power generators, since April 2020, he informed and added that subsequently, it’s cascading effects would last for the next few months and may continue throughout the year.

The financial condition of the general public, small scale industries, and small shops had been deteriorated in the lockdown period and would take some time to recover.

With the lower realization of revenue, it would be difficult for MahaVitaran to make both ends meet.

Moreover, MahaVitaran had approached different banks, financial institutions for assistance but, they had not responded positively, he said.

In the past few years, delayed tariff approvals by Maharashtra Electricity Regulatory Commission (MERC) and inadequacy of tariff adversely affected the liquidity position of MSEDCL.

Due to cash constraints, MSEDCL was compelled to defer several payment obligations including State Gencos, Transcos, and IPPs towards power purchase. This resulted in the accumulation of outstanding payments towards the procurement of power. From Sept-2018 to Mar-2020, MSEDCL raised a total debt of Rs.18600 Crores, in order to discharge the liabilities towards the procurement of power.

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Besides, MSEDCL had an outstanding loan of Rs.16,720 Crores availed for various infrastructure development projects. There was also an overdraft of Rs.3,500 Crores for working capital. As mentioned above, MSEDCL had a total outstanding debt burden of Rs 38,282 Crores at the end of March 2020, he said.

Dr. Raut has informed that at present MSEDCL had to spend an average monthly Rs.900 Cr for loan repayment and interest thereon. The financial situation of MSEDCL might worsen if the debt burden of the additional loans taken due to Covid-19 crisis was shifted to MSEDCL.

On the other hand, it was mandatory to pay the required maintenance and repair costs and pay the power generation companies on time for continuous power supply.