MSEB: In dire straits - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

MSEB: In dire straits

Jan 12, 2001

It is said that desperate situations need desperate solutions. The saying seems apt for the beleaguered Maharashtra State Electricity Board (MSEB). The board has decided to hike tariffs by 30% for power loom units and farmers. These sections have traditionally paid subsidised tariffs. The move comes at a time when the MSEB is facing a financial crunch. A large part of its financial woes are a result of decisions taken by the state government. It is a known fact that MSEB has to pay Enron promoted Dabhol Power Company over Rs 2 bn in dues. The state electricity board has voiced its concerns about the high cost it has to pay for the power produced by Enron. The state governmentís guarantee to off take 90% of what Enron produces, has run the electricity board dry. As a result, now the state government is dragging its feet on Phase-II of the Dabhol Power Project.

It is estimated that MSEBís annual outgo post Dabhol-II would be a significant Rs 71 bn. Added to this, the electricity board will have to pay Rs 17 bn to Reliance Patalganga for purchase of 3,418 million units at Rs 4.89 per Kwh in 2004. Thatís not all. MSEB will also pay Rs 31 bn for purchase of 7,572 million units at Rs 4.12 per Kwh once the Bhadravati project goes on stream in 2006. Bottomline, by 2006, the financially strapped MSEB will have to shell out Rs 119 bn annually.

But this is only a part of its problems. It is estimated that MSEB has to collect a whopping Rs 50 bn from defaulters. The agriculture and the power loom sectors owe a significant 12 bn to the MSEB. Ispat Industries owes it Rs 5 bn. It has to also collect Rs 3 bn from BSES and Tata Power as a result of the standby charges dispute.

Though MSEB has hiked tariffs in a bid to tide over the financial crunch, how far it will be able to translate that into real earnings is a question mark (given its defaulter collection record). According to a leading financial daily, another interesting fact is that out of Maharashtraís 13 million consumers, around 11.5 million receive power at subsidised rates. To change the attitude of these sections of society who have for years paid for power at subsidised rates will be one of its hardest tests.

But if the MSEB has to get itself out of the financial mess it is in, measures like these are required. Letís hope that the political parties donít seize this opportunity and raise voices against the hike to gain political mileage.

Equitymaster requests your view! Post a comment on "MSEB: In dire straits ". Click here!


More Views on News

INDIAN ENERGY EXCHANGE LTD Share Price Down by 5%; BSE POWER Index Down 2.1% (Market Updates)

Sep 22, 2020 | Updated on Sep 22, 2020

INDIAN ENERGY EXCHANGE LTD share price is trading down by 5% and its current market price is Rs 198. The BSE POWER is down by 2.1%. The top gainers in the BSE POWER Index [TOPCOMPANY]. The top losers is INDIAN ENERGY EXCHANGE LTD (down 5.3%)..

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why am I Recommending Caution? (Fast Profits Daily)

Sep 9, 2020

This is why I have changed my short-term view on the market.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 22, 2020 (Close)