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| Power sector's financial health poses high risk on J&K finances | | | Syed Junaid Hashmi
Early Times Report
JAMMU, Nov 21: Despite 20,000 mega watt hydroelectric power potential, the current financial health of the power sector poses a high risk on the State finances.
According to a report on power sector operations and its impact on State finances, there has been increase in purchase cost of power per unit over the years due to decreased power availability from hydro based power plant. State's purchase from coal-based plants has increased over the years despite having more than three major hydroelectric projects in operation across the State.
The report has stated that percentage share of interest costs have also decreased from 2 percent in financial year 2004-05 to 0.4 percent in the financial year 2014-15. This decrease was primarily due to the decreasing debt subscribed by the Power Department. The report has vehemently said that the current financial health of the power sector pose a high risk on the State finances. It has added that tariff realization from different consumer category has not increased commensurate to increasing power purchase cost.
The tariff hikes in the State have been sporadic and they have never been done keeping in mind the interest of the Power Department. The distribution financial losses without subsides in Jammu & Kashmir have also increased substantially over the years. The loss levels increased significantly in financial year 2014-15, on account increased power purchase costs combined with high levels of commercial losses reported in that year. The capital expenditure incurred on power sector has decreased since the year 2010 primarily on account of decrease in investments under Transmission and Distribution (T&D).
The revenue expenditure incurred on the power sector has increased since financial year 2010-11 primarily on account of increase in the expenses under Hydel Generation and Rural electrification. Further, the report has lamented the fact that State power sector has not been self sufficient to carry out its operations as revenue from tax and non-tax revenue is less than the revenue expenditure made by the State towards the power sector.
The report has stated that State has witnessed high levels of deficit. It has held out that the Power Department procures low quantum of power from the short-term market. The Power Department can contemplate purchasing the surplus power available in the short-term market to reduce the deficit levels in the State.
Report has noted that State has high levels of unmetered connections. It has added that high percentage of connections in the State remain unmetered, resulting in incorrect demand estimation in the State. The energy sales to the unmetered category constitute a significant proportion in the overall sales mix, resulting in electricity thefts and other commercial losses. It has further said that State has been battling high levels of Annual Transmission and Consumption (AT&C) losses.
Report has noted with concern that the levels of AT&C losses in the State are unsustainably high. The high line losses due to high percentage share of LT consumers, combined with electricity theft in unmetered categories. It has opined that high levels of AT&C losses combined with insufficient tariff revisions are the primary causes for the high levels of losses in the State.
It has concluded that the Power Development Department of the State had earlier received grants from the planning commission, all aimed at improving the overall operational efficiency but with Central Government scrapping the planning commission, it has to devise new means of generating funds for improving the power structure in the State. Though the Central Government has recently announced a huge package for the State but it is to be seen how the State Government addresses the problem of huge investment being made in the power sector. |
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