The Hindu : Kerala News : KSEB's debt burden Rs. 5,360.64 crores

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Friday, Apr 30, 2004

Kerala

Kerala

KSEB's debt burden Rs. 5,360.64 crores

By P. Venugopal

THIRUVANANTHAPURAM, APRIL 29. The debt burden of the Kerala State Electricity Board (KSEB) came to Rs. 5,360.64 crores as on March 31, 2004, according to a note prepared by the Finance Wing of the KSEB.

During the current financial year, the KSEB will be requiring additional loans worth Rs. 300 crores towards working capital and Rs. 800 crores for capital projects, the note says. The KSEB will have to spend a sum of Rs. 723.30 crores towards interest on these loans and certain other obligations like interest on the Provident Fund deposits of the employees, discount to consumers etc.

The outlay required under the overall head of `interest and finance charges' has been rather on the higher side in the recent years. In 2003-04, the KSEB had to spend Rs. 761.16 crores on this item, as per provisional data now available. The projection for the current financial year is slightly lower mainly because of the higher repayments and the swapping of high-cost loans worth Rs. 1,031.83 crores for low-cost loans made last year.

Of the total borrowings, term loans with the repayment period varying from 10 years to 13 years came to Rs. 3,279 crores as on March 31, 2004. These carry an average interest rate of 10.26 per cent. Government loans (Rs. 268.70 crores) carry an interest of 11.5 per cent, non-SLR bonds (Rs. 1,278.05 crores) 14.79 per cent, public bonds (Rs. 73.15 crores) 11.78 per cent and short-term loans (Rs. 461.39 crores) 4.25 per cent. The loans proposed to be taken for working capital (Rs. 300 crores) and capital projects (Rs. 800 crores) are expected to be available from the market at the interest rates of 8.6 per cent and 4.75 per cent respectively.

According to the KSEB, there is little scope at the present moment for swapping any of these liabilities for loans carrying lower interest rates.

The non-SLR bonds, carrying an average interest rate of 14.79 per cent, constitute the sole high-interest portion of the total debt.

These cannot be retired prematurely or swapped for lower interest loans, because of the contractual obligations to those who had invested in the bonds.

During 2003-04, the KSEB had borrowed a total sum of Rs. 1,423.37 crores from the market, of which a sum of Rs. 1,274.44 crores was utilised for effecting repayments against the interest and principal amount. In its order issued earlier this month, the State Electricity Regulatory Commission (SERC), which is the final arbiter on all matters pertaining to the power sector now, had taken a serious view of the higher borrowings made by the KSEB last year.

The borrowings made by the KSEB in 2003-04 were Rs. 545 crores more than the sum authorised by the SERC in its order for that year. The KSEB's contention is that the higher borrowings were necessitated by the failure of the Government to release a promised subsidy of Rs. 375 crores and the higher quantum of power that had to be purchased from outside due to a substantial fall in the generation of hydel power following the failure of the monsoon last year.

In its latest order, the SERC, however, says that it will not be approving a projected expenditure of Rs. 63 crores needed during the current financial year towards 11.5 per cent interest on the excess borrowing of Rs. 545 crores made last year.

Top KSEB officials describe this as a `queer situation'. "If we obey the SERC, which can be done only by skipping repayments to our lenders, we face the definite prospect of damaging the KSEB's credit worthiness.

The KSEB has never done this and, therefore, has an `A' rating in the market for its credit worthiness. If we destroy our credibility, we will be blacklisted by institutions that offer loans at competitive rates of interest," they say.

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