Calcutta, Aug. 30: Power utility CESC’s auditors Lovelock and Lewes have raised questions about the recoverability of the Rs 70.37-crore that the company had lent to its subsidiary Balagarh Power Company.
The auditors have also mentioned that CESC had not provided for its dues to Damodar Valley Corporation and the West Bengal State Electricity Board. The company has also not provided for the Rs 35.6-crore shortfall in the corpus of employees’ gratuity fund.
“From the available information and records, we are unable to comment on the extent of recoverability of advance given to Balagarh Power Company Limited, a subsidiary company, amounting to Rs 70.37 crore,” the auditors said in their report to shareholders.
The management has, however, not given any time frame for the recovery of this amount. “The company being a promoter of Balagarh is negotiating with prospective investors. The amount of such advances will be adjusted against shares to be issued to CESC in due course,” the management said.
Similarly on the issue of Rs 35.60-crore shortfall in the corpus of gratuity fund, the management has said that no provision has been considered for such shortfall as the company is in the process of liquidating it in a phased manner as advised by the Life Insurance Corporation of India with whom the fund is being maintained.
On the non-provisioning of Rs 14.80 crore payable to DVC, the R.P. Goenka-controlled power utility has said that the disputes had arisen between the company and DVC in respect of additional tariff claimed by the latter for the period of January 1996 to November 1996, May 1997 to October 1998 and August 1999 to March 2000
The matter has been referred for arbitration and is awaiting necessary clearances, CESC said. The company has also added that the power purchase agreement between DVC and the company had expired in December 1994 and the claims of DVC have not been covered in the company’s determination of tariff. Therefore, the company has not provided for Rs 14.80 crore in its accounts.
The company has not provided for WBSEB’s dues amounting to Rs 256.31 crore. The management has said that the dispute is being resolved with the appropriate authorities and therefore has not been provided for.
CESC, which has recently come out of the red has, however, expressed its apprehension of losing high tension consumers due to the introduction of Electricity Act, 2003.
It has observed that while captive generation is encouraged by the act to help bridge the gap between demand and supply in the short run, continuance of cross-subsidy will give captive generation a longer lease of life.
The larger and more efficient generation of the licensees will then face unfavourable competition from the smaller captive units which appears attractive only because of the cross-subsidy element in tariff. The consumers will opt for captive power plant generation since the cross-subsidy element will be much less. This will impact the HT sales of CESC.