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Unfolding story of UPCL`s mismanagemen

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Live lavishly no matter at whose cost

By Dr BP Maithani

RTI Club Uttarakhand has been watching the functioning of UPCL for the last 3 years and we had made representations to the UERC for consideration, pointing to the anomalies noticed in the working of the Corporation unraveled by a series of RTI queries. But, unfortunately, no positive action was ever taken or even initiated by the UERC on our findings and suggestions despite stating that the issues need to be investigated. It has become the standard practice and habit of UPCL to create revenue deficit every year in spite of the fact that UERC has been willingly granting rate hikes regularly to compensate for the losses suffered by the UPCL. It is now twenty-one years of the formation of the State but the financial health of the UPCL continues to be in poor shape for which it is required to hike electricity rates every year. Our observations submitted to the UERC in this year`s ritual of public hearing held on 2 March are as follows:

We feel that there is need for improving the financial health of UPCL by improving the management and plugging the leakage and pilferage of huge resources available with the distribution licensee instead of taxing the consumers to compensate for the massive inefficiency, irregularities and splurge practiced by UPCL. Apart from not preventing the theft of power by bulk consumers and non-recovery of dues from powerful consumers, there are several other instances of mismanagement and rampant corruption in UPCL which have come to light through RTI. No doubt UPCL is a commercial organisation but it does not function as such. Being a public sector undertaking, there is total lack of accountability for misappropriation and theft of public funds which is an open secret.

An independent Audit report of UPCL for the year 20018 has made some telling observations about the state of affairs in the UPCL. It says that “Without qualifying our report, we draw attention to the fact that the accumulated losses of the company are more than its net worth”. It further says that “Accounting policy…relating to accounting and issue of store and spares….is not in accordance with AS-10 ….due to this, profits of the company are over stated by Rs 30,41,39,619 and over statement of the fixed assets by the same amount”; and “the balance under the head Inter Unit Balance of Rs 6,52,75,901 has not been reconciled” and that “depreciation on assets is provided only on the assets in existence at the beginning of the year and no depreciation is provided on the additions made during the year. This has resulted in “overstatement of profit and fixed assets by an amount which is unascertained”. It has further said that “The Company has not maintained proper records of Fixed Assets showing full particulars including quantity and location of fixed assets and ….that “Physical verification of fixed assets has not been carried out”. This apart, submitted below are some of the observations about the working of UPCL for consideration and corrective action so that the gullible consumers are spared of the burden of paying exorbitant price of electricity in the so called `Urja Pradesh`.

UPCL buys power from producer companies under agreed power purchase agreements. One of the clauses in the purchase agreement allows a rebate of two percent of the bill if the payment is made within the stipulated time. For this purpose the overdraft accounts are opened in the banks so that power bills could be paid instantaneously. But for some reasons, UPCL has become a regular defaulter in timely payment of power bills and therefore forgoing the rebate of 2 percent. So much so the UJVNL, a sister organisation and one of the suppliers of electricity to UPCL, has declared that the rebate was not applicable to UPCL thereby saving for itself the out go of rebate amount and robbing the consumers of UPCL the benefit of rebate in the cost of power. It is for this reason the UPCL suffers a loss of crore of rupees every year. We believe that it is a deliberate delinquency due to suspected complicity of the top management of, both, the UPCL and the UJVNL who must be sharing the benefit accruing to UJVNL from no rebate to UPCL. Unfortunately, the high cost of power due to foregone rebate is shamefully passed on to the consumers.

The UPCL management is indulging in the luxury of a corporate which generates huge surplus and profit unmindful of the losses incurred by it every year. It is evident from the illegal and irrational concessions extended by it to the employees and pensioners of not only UPCL but UJVNL and PTCUL also in power billing. Instead of giving reasonable rebate to employees in the consumption of electricity if at all necessary, it has given blanket liberty to the employees of all the three corporations to consume as much as they want and pay only fixed paltry sums as electricity charges. Interestingly, UPCL is bestowing same benefits of concessional power to the employees of UJVNL also from whom it buys power foregoing even the normal admissible rebate available in power purchase agreements. This large heartedness of UPCL is albeit at the cost of consumers whom it is looting insensitively by raising tariff every year by manipulating deficit in accounts. Given this freedom, the information on the actual consumption of select employees obtained under RTI was startling. In case of a General Manager, bill for 25 months was whooping Rs 4,26,880, i.e. a monthly consumption of Rs 1,77,075 and the bill of the MD was above Rs 1,80,000 for 14 months, i.e., over Rs 13,000 per month against a deduction of merely Rs 425 per billing deducted from the salary or pension of the officers. One can easily assess the extent of loss being incurred by UPCL due to virtually free electricity supply to over 12,000 employees and equal number of pensioners with no limit for consumption. Compare this with the system prevailing in Himachal Pradesh where instead of fixed amount, a rebate of 100, 125, and 155 units is allowed to different categories of employees and not to pensioners. In Rajasthan, also, the standard rate of concession is Rs 150 per month in the form of electricity allowance to serving employees only irrespective of the position or rank of the employee. In Haryana, there is a system of reimbursement of electricity charges bi-monthly along with the pay as per their entitlement which is 80, 90 and 115 units per month for different categories of employees. In Uttarakhand, there are scores of offices of UPCL and its sister organisations all over the state where meters are installed but not functioning and therefore no readings. This clearly shows that there is gross misuse or abuse of electricity by the employees and pensioners of power entities themselves in Uttarakhand. Section 62(3) of the Electricity Act 2003 specifically forbids any discrimination between departmental and other consumers in fixing tariff rates. This means that the system of unlimited supply of electricity to the employees and pensioners in Uttarakhand on paltry fixed charges is not only unreasonable but also illegal. It is intriguing how the UERC is permitting this kind of loot to power entities.

There are also instances of gross financial frauds committed by the Officers and employees of UPCL. In one case it was discovered that UPCL withdrew Rs 50 crore from the FD account in PNB and deposited the withdrawn amount in the EMF account of the same bank. On the same date UPCL withdrew Rs 50 crore from the EMF account and opened a new FD account in the Bank of Baroda. The next day it opened an overdraft account in the BOB and again the next day it took an overdraft of Rs 50 crore from the BOB and placed that amount in the EMF account of PNB. Now this whole exercise is inexplicable on rational considerations. The only motive appears to be to extend double benefits to BOB first in the form of FD of Rs 50 crore and then by taking an expensive overdraft of Rs 50 crore for no perceptible reasons. As per information accessed through RTI, BOB already had Rs 100 crore of UPCL fund in FD on that date and if at all there was any emergency, Rs 50 crore could have been withdrawn from that FD account to meet the exigency. By this unscrupulous maneuvering, the UPCL management created a perpetual liability unnecessarily costing the corporation Rs 1 crore (2 % of 50 crore) per month in the form of the loss of rebate of 2% on timely payment of bills of electricity in addition to higher interest and surcharge payable on the overdrafts.

There are some other issues also which need to be looked into. The UPCL pays medical allowance at the rate of Rs 404, 696, 782 and 1340 per month to class iv, iii, ii and i serving and retired officers of the three power entities. This is in addition to cashless facility available for inpatient treatment in the empanelled hospitals. Normally, medical facility is provided in the form of reimbursement of the cost incurred by employees in the treatment. But here it is being doled out in the form of allowance as well as reimbursement. Further, there is discrimination in the payment of medical allowance. While MD and the Directors working on contractual basis for a fixed term are receiving this benefit, the lower level contractual employees are denied. Similarly, the interest payable to the consumers on the security amount is being illegally adjusted under a new additional security head invented by it. Further, UPCL instead of renewing the FD of security amount on maturity, it is encashing the FD amount in spite of the fact that UERC has allowed it to take term loan against the FD amount for meeting the need of fund in emergency. Further, as per rule, fixed charge in the electricity bills is to be levied on the load of connection but UPCL is charging fixed charge on the tariff or consumption of electricity to exploit the consumers. There are also issues of exceptionally higher bills of electricity and water, legal and professional cost, advertisement and promotion, travelling and conveyance, etc., in its balance sheet without apparent benefit to the Corporation in reducing the cost and increasing the income.

In view of the above irrefutable observations, our submission is that UERC should reject the request of UPCL for increasing electricity rates and institute a thorough review of the working of UPCL in the light of the issues raised in the presentations of the stake holders. If UPCL is unable to perform its responsibility efficiently and honestly then why not the job of power distribution is contracted to private licensees as is done by Delhi government?

(The writer is President, RTI Club, Uttarakhand. Views expressed are personal)