Hyderabad: Accusing his predecessor K. Chandrashekar Rao (KCR) of gross corruption and imprudence, Telangana Chief Minister Revanth Reddy Thursday called for a judicial probe into the state’s power purchase agreements and the execution of two mega power projects.
In a white paper on the state’s power sector tabled in the Telangana assembly Thursday, the new Congress government, formed in the state earlier this month, claimed that under the previous KCR-led Bharat Rashtra Samithi (BRS) government, power distribution companies (discoms) here have accumulated losses to the tune of Rs 62,461 crore as on 31 March 2023 and had a debt burden of Rs 81,516 crore as on as on 31 October.
Losses were to the tune of Rs 12,186 crore as on 2 June, 2014, the paper added, the date the separate state of Telangana was carved out of Andhra Pradesh (AP), when KCR took over the reins of the state from the then Congress government in AP.
According to the paper, which reviews the governance of the crucial electricity sector during the nine-and-a-half years of BRS governance in the state, the financial health of the power sector in Telangana was “precarious” and a “matter of grave concern”.
“Of the total debt, Rs 30,406 crore was borrowed as working capital primarily to pay power charges to the generators. Despite this, an amount of Rs 28,673 crore of generation and transmission dues remain to be paid by the discoms,” the paper said.
The difficulty faced by discoms in paying power purchase bills has been aggravated by the default of the government in paying the power bills of its own departments, like Panchayati Raj, water works, municipalities. This has now mounted to Rs 28,842 crore, said the paper.
Of this, the amount due from lift irrigation projects like the Kaleshwaram project on the Godavari river alone amounts to Rs 14,193 crore. The government’s default in paying committed true-up charges of Rs 14,928 crore has added to the further deterioration of discom finances, the document added.
True-up is the additional charge power discoms seek from consumers to meet cost escalations like that of coal and the supply chain. These charges have to be approved by the State Electricity Regulatory Commission.
Another reason for the burden on discoms is the difference in estimation of power supply to the agriculture sector, said the paper.
“In these circumstances, merely to keep the power supply going, discoms are resorting to borrowings on a regular basis which have reached unsustainable proportions. There is very limited scope to continue to fund the purchase of power through these means. Discoms are now finding themselves in debt trap due to failure of the (previous) government in paying its dues and commitments to the sector,” said Mallu Bhatti Vikramarka, Telangana deputy CM and finance and energy minister, while presenting the paper.
While BRS members and those part of the previous government, like K.T. Rama Rao, have claimed that loans were used to build assets such as new power production units, the Congress government accused it of improper utilisation of funds and massive corruption in project execution and power purchase agreements.
Judicial inquiry
Taking part in the discussion in the assembly on the white paper, CM Revanth Reddy said his government would initiate a judicial probe into the KCR government’s power purchase agreements with Chhattisgarh, and the setting up of Yadadri and Bhadradri Thermal power plants in the state.
“The previous government entered the Chhattisgarh agreement without tenders. We were thrown out of the House (by marshals) for confronting the BRS regime on [the] Chhattisgarh agreement. One power department official was demoted and posted in a remote area for bringing out the facts on Chhattisgarh agreement,” Revanth said in the house.
The CM stated that the agreement with Chhattisgarh for 1,000 megawatt power supply has resulted in Telangana incurring a burden of Rs 1,362 crore.
Revanth added: “The BRS government brought in an outdated company, to build the Yadadri thermal power project, using the expired sub-critical technology and thus incurred huge losses to the state. Thousands of rupees crores of corruption took place in the Bhadradri project. Judicial enquiry will be ordered into the construction of these two power projects.”
The CM also announced the constitution of a fact-finding committee including members of all parties on the BRS claims of “24-hour power supply”.
The BRS government has reportedly claimed in the past that it had ensured 24-hour free power supply to the agricultural sector.
Revanth’s statement came in response to claims made by former energy minister in the BRS government Jagadish Reddy — in response to the paper — of no wrongdoing and his challenge to the Congress government to order a judicial probe on the allegations of huge graft in the power sector in the past nine-plus years.
Agreement with Chhattisgarh
Telangana had entered into a memorandum of understanding (MoU) with the Chhattisgarh government in November 2014, to receive 1,000 MW of power from its Marwa Thermal Power Station.
The KCR government had then also requested Chhattisgarh for an additional 1,000 MW of power, which did not materialise, said the paper. Power scheduling started from 6 May, 2017.
Delay in operationalisation of the captive coal block of Marwa resulted in lesser coal supply. Due to this, the average plant load factor of Chhattisgarh power supplied to Telangana dropped from 72.51 percent in 2017-18 to 19.71 in 2021-22. Chhattisgarh stopped power supply from April, 2022, said the white paper.
In anticipation of materialisation of the entire 2,000 MW of power requested, Telangana government had directed its discoms to apply to the Power Grid Corporation of India Limited (PGCIL) for a 2,000 MW transmission corridor.
“The first 1,000 MW of power was also not fully available leaving a considerable corridor unused. However, corridor charges had to be paid for the full 1,000 MW. From May 2017 to October 2020, Rs 638.5 crore was paid for the unused corridor, the paper added.
Bhadradri and Yadadri
The two thermal power projects were taken up by the BRS government after the state formation, named after the two most revered shrines in Telangana.
The 1080 MW-capacity Bhadradri Thermal Power Station (BTPS) consisting of four 270MW units was planned with subcritical technology and envisaged to be completed in two years at a cost of Rs 6.75 crore per MW. This project was, however, completed in seven years at a cost of Rs 9.74 crore per MW, said the Congress government’s white paper.
Making a comparison with the state’s 800 MW-capacity Kothagudem Thermal Power Station-VII stage, the paper says it was commissioned in 48 months in 2018, with super critical technology at a cost of Rs 8.01 crore per MW.
The 4,000 MW (5x800MW) Yadadri TPS in Nalgonda district is under implementation. The initial capital cost of this project was Rs 25,099 crore (Rs 6.27 crore/MW). But according to the latest project reports, the cost has gone up to Rs 34,543 crore (Rs. 8.64Cr /MW), said the paper.
For comparison, the white paper said, the Centre-executed NTPC Ramagundam phase-I project in the state is being constructed at a cost of Rs 7.63 crore/MW.
Coal for the Yadadri project is planned to be procured from the Singareni Collieries in Khammam and Bhadradri, to be transported by rail. The transport cost is likely to be Rs 803 crore/annum at the rate of Rs 550/MT. At present the railway line is a single track which may present some challenges, the paper said.
Reasons for financial difficulties of power discoms
The paper listed the following reasons for the financial difficulties of power discoms.
Government department dues: Over the years, various departments have not been paying their power consumption charges regularly and the backlog has been growing. These arrears shot up from Rs 1595.37 crore in June 2014 to Rs 28842.72 crore in October 2023.
Difference in estimation of agriculture supply: The estimate adopted by Telangana State Electricity Regulatory Commission for agricultural power is lesser than the estimate submitted by discoms. Therefore, lesser subsidies for the agriculture sector are being provisioned according to tariff order. As on 31 March 2023, the additional cumulative financial burden on discoms due to difference in estimate of agricultural power was Rs 18,725 crore.
In June 2014, there were 19.03 lakh agricultural power connections in Telangana. As on date, there are 27.99 lakh such free connections. The energy consumption of the agriculture sector has grown by 1.7 times and power for lift irrigation has also increased 5.66 times in the said period.
True-ups and fuel cost adjustments regulations provide for Telangana State Power Generation Corporation/National Thermal Power Corporation to pass on cost escalation of coal etc., to the discoms through “true up” orders of state/central electricity regulatory commissions respectively.
In addition, Discoms can also seek true-up for unavoidable purchases of expensive power. Discoms have to pay these enhanced costs by recovering the same from consumers in the form of fuel cost adjustment (FCA) in future bills. Telangana State Electricity Regulatory Commission has approved power purchase “true-up” of Rs 12,550 crore for the 2016-17 to 2022-23 period.
However, to avoid recovery of the amount from consumers, the BRS government assured reimbursement to the Telangana discoms. But the sum is yet to be released.
Apart from this, there is a subsequent amount of Rs 2,378 crore towards FCA which is not recovered from the consumers. Discoms have asked for this reimbursement too.
Short term purchases: Owing to the variability imposed on account of renewables and to cater to intraday fluctuations in demand, as well as forced outages of plants, discoms have purchased power from short term markets.
Working capital loans: Because of the mentioned revenue gaps, the Telangana State Southern Power Distribution Company Limited and Telangana State Northern Power Distribution Company Limited have had to borrow from banks and financial institutions to pay generators. In the process interest cost had to be borne by discoms. The outstanding amount of these working capital loans as in October 2023 is Rs 30,406 crore.
Average monthly collection and expenditure of Telangana discoms: Discoms have been facing cash deficits each month owing to various reasons. From April to November 2023, the average cash deficit each month has been about Rs.1,386 crore. Due to this, discoms are facing difficulties in making payments to generators. So, they are taking working capital loans to meet the obligations, the paper says.
Payables to Singareni Collieries Company LImited: Notwithstanding the said working capital loans having been taken by discoms, there is still a shortfall in payment to Singareni Collieries. The outstanding amount payable to SCCL is Rs 19,431 crore.
“Despite the above legacy of financial imprudence, our government is committed to providing quality and reliable power to Telangana people by overcoming the challenges faced by the sector with a responsible and transparent approach,” said deputy CM Vikramarka.
(Edited by Poulomi Banerjee)