NEW DELHI: The Delhi government on Tuesday gave its consent to Delhi Electricity Regulatory Commission (DERC) to invest fresh equity worth Rs 500 crore in the cash-strapped power distribution companies of BSES Rajdhani and BSES Yamuna. This paves the way for the utilities to get a bank loan to clear outstanding dues; but this also means that more of the taxpayer's money will go into these discoms. Highly-placed sources said the discoms would pitch for a tariff hike of up to 35% in the next year's revision.
DERC officials confirmed that the government submitted in writing that it would invest Rs 500 crore in the two companies under its 49% stake to enable the companies to raise a loan. "The immediate problem of the discoms has been resolved with this consent by the government and they will inform the bank immediately that the two promoters - Reliance Infra and Delhi government - will together invest Rs 1,020 crore in the BSES discoms. This will enable them to get a loan of Rs 5,100 crore to clear overdue amounts they own to generators like NTPC, which has threatened to snap supply to Delhi by January 7," said DERC officials.
The regulator has now asked the discoms to provide by Monday details about their payment schedule and how they will liquidate past dues to generation companies . The Commission has also pledged to maintain great control over the discoms in financing and will keep tabs on how money is being received and how funding is being utilized.
DERC officials confirmed that the government submitted in writing that it would invest Rs 500 crore in the two companies under its 49% stake to enable the companies to raise a loan. "The immediate problem of the discoms has been resolved with this consent by the government and they will inform the bank immediately that the two promoters - Reliance Infra and Delhi government - will together invest Rs 1,020 crore in the BSES discoms. This will enable them to get a loan of Rs 5,100 crore to clear overdue amounts they own to generators like NTPC, which has threatened to snap supply to Delhi by January 7," said DERC officials.
The regulator has now asked the discoms to provide by Monday details about their payment schedule and how they will liquidate past dues to generation companies . The Commission has also pledged to maintain great control over the discoms in financing and will keep tabs on how money is being received and how funding is being utilized.
Meanwhile, BSES officials defended the equity infusion and insisted it was not a 'bailout' . They blamed the regulator for their financial crisis and said they had been promised a 'cost-reflective ' tariff from April onwards. The discoms said if they had been unable to meet the bank's terms for the loan, they would have been unable to pay back NTPC, which would have lead to a blackout in the city. For a funding requirement of Rs 5,100 crore, the bank had specified a debt-equity ratio of 80:20.
Consequently, both the promoters have now agreed to infuse a total of Rs 1,020 crore in the BSES discoms in proportion to their respective equity holding. "If you are 49% owner in a company and you have to raise loans with a condition that 20% equity needs to come from the promoters, how can it be called a bailout? We have written to the bank now that the equity owners are committed and they should expedite the loan proposal ," said BSES Rajdhani CEO Gopal Saxena.
In its defence, the government made it clear that it agreed for the equity infusion because it did not want to dilute its shares and become a lesser partner.
During privatization in 2002, Reliance group won two of the three bids for supplying power to Delhi and thus was formed BSES Rajdhani and BSES Yamuna in a joint venture participation between Reliance Infrastructure and Delhi government owning 51% and 49% stakes respectively. Total equity infused by the two promoters then was Rs 576 crore. Nine years hence, the fresh contribution to the companies by both promoters is nearly double the 2002 amount. "Had the regulator given us correct tariff, we would have performed well like we did for eight years with no need of fresh capital. Our under-recovery till 2011 has been almost Rs 10,000 crore for both companies. We have not paid any dividend so far because we chose to invest everything back into the company," said a top BSES official.
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