CAG points to MahaVitaran's inefficiencies

Statutory auditor Comptroller and Auditor General of India (CAG) has pointed to inefficiencies in operations of the state electricity distribution utility, including a high number of unmetered connections and faulty meters, which resulted in under billing and higher distribution losses.

The CAG report on public sector undertakings (PSUs) for the year ending March 31, 2015, noted that 42.05% or 16.01 lakh of the total 38.07 lakh agricultural consumers (AgC) received unmetered supply. "It could be seen that 42% of the AgC are unmetered and there was no appreciable progress in installation of meters, mainly due to the slow pace of purchase of meters," it noted.

In June 2015, the Maharashtra Electricity Regulatory Commission (MERC) directed the MahaVitaran to complete the metering within three years (by the end of 2017-18).

"The assessment of AgC without metering was against the provisions of (the) Electricity Act, 2003. In the absence of metering, AgC were billed on the basis of load as per the extant orders of MERC and the units consumed by them could not be considered for billing. Further, the unit consumption assessed based on the index method stated above might not be the actual consumption of AgC, resulting in distorted figures of distribution losses," the CAG said.

"We observed that the faulty meters in AgC were comparatively higher in number and in percentage terms as compared to other categories," it added.

"Due to high incidence of faulty meters, the consumption was not properly recorded even for metered AgC and was accounted under distribution losses. The under-billed units, in respect of faulty meters, worked out at the rate of per horse power (HP) consumption of normal meters for the period of April 2012 to March 2015 were 3,271 MUs. Therefore, the company should take adequate steps to reduce the incidence of faulty meters under agricultural category," it noted.

"High incidence of unmetered connections or faulty meters of agricultural consumers resulted in under billing and consequential distribution losses," the report said, adding that the "collection inefficiency of dues from agriculture consumers resulted in pressure on the company's working capital and the interest on these borrowings was partially disallowed by MERC while fixing the tariff."

Distribution losses are the difference between the energy drawn by the utility at distribution periphery and the energy billed to consumers.

"Increase in distribution losses in Bhiwandi DF Area has neither been addressed by the franchisee nor by the company," said the CAG. Due to high losses in the Bhiwandi circle, the MahaVitaran had handed over the distribution of electricity within the circle to Torrent Power Limited (TPL) with effect from January 26, 2007, for a period of 10 years.

The distribution losses in Bhiwandi circle initially reduced from the level of 41.85% in 2006-07 to 17.30% in 2011-12. Thereafter, it registered an increasing trend of distribution loss from 17.30% in 2011-12 to 21.64% in 2014-15.

The MahaVitaran's distribution losses of for the period 2010-11 to 2013-14 were 17.28%, 16.03%, 14.67% and 14% and was second lowest in comparison with other six neighbouring state utilities (Andhra Pradesh, Karnataka, Tamil Nadu, Gujarat, Madhya Pradesh and Rajasthan), except in 2010-11. They were within the norms approved by the MERC.

"The company should systematically monitor monthly or quarterly losses of the divisions," the CAG said, adding that its monitoring of distribution losses was inadequate in absence of fixation of micro targets at feeder and DTC-level for energy audit.

Meanwhile, the power sector activists claimed that the utility used power consumption by both metered and unmetered agricultural consumers to disguise losses and inefficiency. "Losses are passed off as agricultural consumption," said Pratap Hogade of the Maharashtra Rajya Veej Grahak Sanghatana, adding that while meters of such consumers were not actually read in many cases, they were given bills based on average billing. He charged that distribution losses were passed off as consumption by unmetered consumers.

More expenses for utility

The CAG noted that due to a shortfall of 2,004 million units (MUs) in purchase of solar and non-solar energy from renewable energy operators, which worked out to 7.14% of the target, the MahaVitaran may be required to deposit Rs260.33 crore in the Renewable Purchase Obligation Regulatory Fund, as per the MERC directives.