By Hamarbabiang Lyngdoh
The attention of the public has of late been drawn to the problems plaguing the MeECL and the agitation of its employees due to non-payment of their salaries for the last two months. It seems that the financial problems of this Corporation keep recurring and the measures taken to address them so far appear to be for the short term only. To solve the problems of MeECL, one has to solve all the problems faced by its subsidiaries, which is no easy task.
MeECL is a parent company with the following subsidiaries – Meghalaya Power Distribution Corporation Ltd. (MePDCL) or the State Discom which is mandated with distribution of power in the state, Meghalaya Power Generation Corporation Ltd. (MePGCL) or the State Genco which is responsible for generation of power from its generating stations and Meghalaya Power Transmission Corporation Ltd.(MePTCL) or the State Transco which is tasked with transmission of power at voltages above 33 KV within the state. These three subsidiaries have different objectives and the problems they face are unique to them. However, the common problem they all face is financial.
For distribution of power within the state, MePDCL purchases power form the state Genco, MePGCL, as well as from Central PSU’s such as NEEPCO, NHPC, Palatana and NTPC with whom the Discom had entered into Power Purchase Agreements (PPA’s) for purchase of power from their generating stations. Once the PPA is signed, the Discom is bound to purchase the power from the respective power stations and if it fails to do so, it has to pay the capacity charge which is equal to 50% of the tariff determined by the Central or State Electricity Regulatory Commission for that particular power station. At present, Meghalaya requires about 1200 Million Units (MU) of energy annually for sale within the state (ref. MSERC’s Distribution Tariff Order for FY 2020-21). The power available from the Central Power Stations is around 1200 MU and from MePGCL’s Power Stations is also about 1200 MU, totalling around 2400 MU against the State’s requirement of 1200 MU only. Therefore, the state Discom is bound to sell about 50% of its available power (which has become surplus) in the market at rates which are usually below the average tariff of about Rs. 5.50 per unit it sells within the state,. The state Discom is therefore caught in a dilemma – it has to pay 50% tariff as capacity charge if it refuses to take the power from the power station for which the PPA was signed and if it does take, it has to sell the power at less than the purchase rate. The average purchase price from the Central generating stations (NEEPCO and Palatana) is Rs. 3.00 / unit for about 1200 MU of their power while from NTPC it is much higher. The State Genco sells its power to MePDCL at an average tariff of only Rs. 1.37 / unit fixed by the State Electricity Regulatory Commission.
MePDCL, therefore, cannot afford to sell the power it purchases from the Central Generating Stations in the market (i.e, at the Power Exchange) since to do so it would be selling at a loss. To recover its costs, it has to sell all 1200 MU of power it gets from these stations at rates not below Rs.5.00/unit which it is recovered by selling within the state. The surplus power from MePGCL can then be sold directly (either through cross border trade or to bulk consumers outside the state) by the State Genco which at present is selling its power at a throwaway price of Rs. 1.37/ unit (which is even less than the minimum sale rate at the Power Exchange). The state Discom and Genco can mutually dissolve the PPA’s they have executed for the new Power Stations which still have interest and debt liabilities and whose tariff is still high (about Rs. 4.00 to 5.00/ unit).
It may be mentioned that for construction of a power project, all Gencos take loans from financial institutions to the extent of 70% of the project cost and have to repay the loan with interest in 12 to 15 years’ time from the date the project is commissioned. The contribution of loan repayment and interest to tariff ranges from Rs. 2.50 to Rs. 3.50 / unit. Therefore, the tariff from all new projects in the Central, State or Private sector will be high in the initial years and will gradually come down once the loan is repaid over the years. The present tariff of Rs. 1.29 / unit for the Myntdu Leshka H.E. Project which was commissioned a few years ago and Rs. 0.85 / unit for the recently commissioned New Umtru H.E. Project fixed by the SERC are way too low and hardly cover their normal expenses, not to speak of repayment of loan and interest. The result is that the State Genco loses its ability to honour its debt obligations and if interest and loan instalments are to be paid on time, it will be at the cost of the salaries of its employees. Besides, repairs and maintenance which are vital to the health of the power stations have to be dispensed with, which will lead to total shutdown of the power stations in the near future.
By letting the State Genco sell its power either through cross border trade or directly to bulk consumers outside the state, the tariff it would get will be much higher than Rs. 1.37 / unit which it is now getting. The export price to Bangladesh is around Rs. 5.00 to Rs. 5.50 / unit at present. If the power from the new power stations (i.e., Myntdu-Leshka and New Umtru) totalling about 650 MU is sold at this rate, the State Genco would get more than Rs. 300 crore annually from such sale, against its annual financial requirement of close to Rs. 400 crore. The remaining requirement of less than Rs. 100 crore can be raised from its old generating power stations through sale of around 500 MU within the state at the rate of less than Rs. 2.00 / unit.
The agreement for sale outside the state may be made for about ten years or so till the loans taken for the new projects are liquidated and tariff would then come down drastically (by about Rs. 2.50 to Rs. 3.50/unit) from the initial rate of Rs. 5.00 / unit .This power can then be sold within the state at very low rates and the consumers in the state would not have to bear the interest and loan burden of these projects.
It may be pointed out that states like Jharkhand and Tripura have already taken the initiative to export power to Bangladesh. Similarly, countries like Nepal and Bhutan have also entered into agreement with Bangladesh for export of power from some of their power projects to this country. With power surplus states rushing to fill the demand gap in Bangladesh, time will not be far when the country will fully meet its power demand and the opportunity of export from Meghalaya will be lost forever. While the early birds from far and near have already caught the worm, Meghalaya is still to notice the opportunity standing at its doorstep and which is likely to slip away very soon.
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