Approval of Annual Budget of MSLDC for FY 2014-15€¦ · NLDC National Load Despatch Centre NPTI...
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Order - Case No. 178 of 2013 Page 1 of 56
Before the
MAHARASHTRA ELECTRICITY REGULATORY COMMISSION
World Trade Centre, Centre No.1, 13th
Floor, Cuffe Parade, Mumbai 400005.
Tel. 022 22163964/65/69 Fax 22163976
Email: [email protected]
Website: www.mercindia.org.in / www.merc.gov.in
Case No. 178 of 2013
In the matter of
Petition filed by MSLDC for approval of Budget of Cost of Operations for FY 2014-15
Smt. Chandra Iyengar, Chairperson
Shri Vijay. L. Sonavane, Member
Order
Date: 7 March, 2014
In accordance with the first proviso to Section 31(2) of the Electricity Act, 2003 (EA
2003), the Maharashtra State Electricity Transmission Company Limited (MSETCL), which
is the State Transmission Utility (STU) in the State of Maharashtra, operates the Maharashtra
State Load Despatch Centre (MSLDC). MSETCL, in its capacity under the first proviso to
section 31(2), filed a Petition on 26 November, 2013 seeking the Commission’s approval for
the budget for the cost of operations of MSLDC for FY 2014-15 as required under Regulation
18.1 of the MERC (Transmission Open Access) Regulations, 2005. The Commission, in
exercise of the powers vested in it under the Electricity Act, 2003 and all other powers
enabling it in this behalf, and after taking into consideration all the submissions made by
MSLDC, issues raised during Public Hearing, and all other relevant material, determines the
budget for MSLDC for FY 2014-15 as under:
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 2 of 56
TABLE OF CONTENTS
List of Tables ............................................................................................................................ 3
Abbreviations ........................................................................................................................... 5
1 Background ..................................................................................................................... 7
2 Technical Validation Session ......................................................................................... 8
3 Public Hearing ................................................................................................................ 9
4 Approval of Revenue Budget ...................................................................................... 13
Part – A: Operating Cost Budget .................................................................................... 13
Employee Expenses ....................................................................................... 14
Administration and General Expenses ......................................................... 19
Repairs and Maintenance Expenses ............................................................. 21
Interest on Working Capital ......................................................................... 24
RLDC Fees and WRPC charges ................................................................... 25
Part – B: MSLDC Capital Charge Budget ..................................................................... 26
Depreciation ................................................................................................. 33
Interest on long term loan capital................................................................. 34
Return on Equity (RoE)................................................................................. 37
Part - C: Final True-up for FY 2012-13 ......................................................................... 38
Part - D: Provisional True-up for FY 2013-14 ............................................................... 39
Part - E: Summary of Revenue Budget for FY 2014-15 ................................................ 42
5 Determination of SLDC Fees and Charges and Mechanism for Recovery ............ 43
SLDC Fees and Charges: ............................................................................................... 43
6 Applicability of the Order and key directives ........................................................... 49
Summary of Findings: .................................................................................................... 49
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LIST OF TABLES
Table 4-1: Employee Expenses as submitted by MSLDC ....................................................... 14
Table 4-2: Details of System Operator Training conducted at NPTI ...................................... 17
Table 4-3: Approved Employee Expenses ............................................................................... 19
Table 4-4: A&G Expenses submitted by MSLDC .................................................................. 19
Table 4-5: Approved A&G Expenses ...................................................................................... 21
Table 4-6: R&M Expenses submitted by MSLDC .................................................................. 22
Table 4-7: Approved R&M Expenses...................................................................................... 23
Table 4-8: Interest on Working Capital as submitted by MSLDC .......................................... 24
Table 4-9: Interest Rates for Working Capital ......................................................................... 25
Table 4-10: Approved Interest on Working Capital ................................................................ 25
Table 4-11: Approved RLDC fees and WRPC Charges .......................................................... 26
Table 4-12: Status of Capex Schemes FY 2013-14 as submitted by MSLDC ........................ 27
Table 4-13: Capitalisation proposed by MSLDC .................................................................... 28
Table 4-14: Approved Capitalisation ....................................................................................... 32
Table 4-15: Gross Fixed Assets ............................................................................................... 32
Table 4-16: Depreciation submitted by MSLDC ..................................................................... 33
Table 4-17: Approved Depreciation ........................................................................................ 34
Table 4-18: Interest on long term loan capital as submitted by MSLDC ................................ 34
Table 4-19: Details of existing loans allocated to MSLDC by MSETCL ............................... 35
Table 4-20: Approved Interest on long term loan capital ........................................................ 37
Table 4-21: Return on Equity submitted by MSLDC .............................................................. 37
Table 4-22: Approved Return on Equity ................................................................................. 38
Table 4-23: Final True-up for FY 2012-13 .............................................................................. 39
Table 4-24: Provisional True-up for FY 2013-14 .................................................................... 40
Table 4-25: Revenue Budget for FY 2014-15 ......................................................................... 42
Table 5-1: Approved MSLDC Budget for FY 2014-15 ........................................................... 43
Table 5-2: Revision in Charges proposed by MSLDC ............................................................ 44
Table 5-3: SLDC fees and charges approved by the Commission .......................................... 46
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Table 5-4: Determination of share of each distribution Licensee out of approved MSLDC
Budget for FY 2014-15 ............................................................................................................ 47
Table 5-5: Approved recovery of SLDC Fees & Charges ....................................................... 47
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ABBREVIATIONS
A&G Administrative and General
ABT Availability Based Tariff
ALDC Area Load Despatch Centre
AMC Annual Maintenance Contract
APR Annual Performance Review
ARR Aggregate Revenue Requirement
BSM Balancing and Settlement Mechanism
CAGR Compounded Annual Growth Rate
Capex Capital Expenditure
CERC Central Electricity Regulatory Commission
CPD Co-incident Peak Demand
CPI Consumer Price Index
CWIP Capital Work in Progress
DA Dearness Allowance
DPR Detailed Project Report
FBSM Final Balancing Settlement Mechanism
GFA Gross Fixed Assets
GoM Government of Maharashtra
IDC Interest During Construction
IWC Interest on Working Capital
InSTS Intra-State Transmission System
LD Load Despatch
MoP Ministry of Power
MERC Maharashtra Electricity Regulatory Commission
MSETCL Maharashtra State Electricity Transmission Company Limited
MSLDC Maharashtra State Load Despatch Centre
NCPD Non-Coincident Peak Demand
NLDC National Load Despatch Centre
NPTI National Power Training Institute
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NRLDC Northern Regional Load Despatch Centre
O&M Operation and Maintenance
PFC Power Finance Corporation
PLR Prime Lending Rate
R&M Repairs and Maintenance
RLDC Regional Load Despatch Centre
RoE Return On Equity
SBI State Bank of India
SCADA Supervisory Control and Data Acquisition
SLDC State Load Despatch Centre
STOA Short-Term Open Access
STU State Transmission Utility
TOAU Transmission Open Access Users
TVS Technical Validation Session
WPI Wholesale Price Index
WRLDC Western Regional Load Despatch Centre
WRPC Western Regional Power Committee
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1 Background
1.1 MSLDC filed a Petition on 26 November, 2013 seeking the Commission’s approval of
the budget for the cost of operations of MSLDC for FY 2014-15 as required under
Regulation 18.1 of the MERC (Transmission Open Access) Regulations, 2005. The
Commission scheduled a Technical Validation Session (TVS) at the office of the
Commission on 9 January, 2014 in the presence of all stakeholders. In the meantime,
the Commission raised preliminary data gaps and discrepancies identified to MSLDC
vide Set 1 and Set 2 through emails dated 13 December, 2013 and 30 December, 2013
and directed MSLDC to file a reply prior to the TVS. The MSLDC submitted replies to
the data gaps raised vide email dated 8 January, 2014. Subsequently, the Commission
directed MSLDC to submit the revised Petition incorporating the changes submitted
along with the replies to queries prior to 15 January, 2014. In compliance to the
Commission’s directive, MSLDC submitted the revised Petition for approval of the
Annual Budget for FY 2014-15 on 15 January, 2014 after addressing the observations
made during the TVS and furnished additional information in response to data gaps
identified by the Commission. The prayers made in the revised Petition (hereafter
referred as Petition) are as under:
“
a) Consider and approve the Budget of Cost of Operations of the Maharashtra
State Load Despatch Centre (MSLDC) for the Financial Year 2014-15, True
up for F.Y. 2012-13 and Annual Performance Review for F.Y. 2013-14.
b) Approve the MSLDC Fees & Charges as deemed appropriate, and approve
the principles for levy of MSLDC Fees and Charges.
c) Continue the other charges i.e. Scheduling charges, Rescheduling Charges,
Registration Fees, Processing Charges and Delayed Payment Charges as
approved in MSLDC Budget Petition Order in Case No.133 of 2012 dtd. 22nd
March 2013.
Considering the rates charged by other SLDCs, it is proposed to approve
following charges for FY 2014-15.
SN Particulars Existing Charges (Rs.) Proposed charges (Rs.)
1 Registration Fees 10,000 Per Connection 20,000 Per Connection
2 Scheduling Charges 1,000 Per Day 3,000 Per Day
3 Rescheduling Charges 3,000 Per Revision 3,000 Per Revision
4 STOA Application Fee 5,000 Per Application 10,000 Per Application
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d) Retain the revenue through Scheduling, Rescheduling, Registration Fees and
Processing Fees as a surplus and reserves of MSLDC which would help in
providing the margin money for further CAPEX as recommended by the Task
Force set up by MoP.
Pass such other and further orders as are deemed fit and proper in the facts
and circumstances of the case.”
2 Technical Validation Session
2.1 During the TVS held on 9 January, 2014, the Commission made certain observations
and additional information was sought from MSLDC regarding the replies submitted by
MSLDC to the preliminary data gaps raised vide Set 1 and Set 2 through emails dated
13 December, 2013 and 30 December, 2013 respectively since the preliminary data
gaps were required to be addressed for further processing of the Petition. In view of the
same, MSLDC was directed to submit a revised Petition incorporating the changes
submitted along with the replies to queries prior to 15 January, 2014.
2.2 The Commission mentioned the importance of Operational and Financial autonomy for
MSLDC in view of the Gireesh Pradhan Committee’s recommendations and also as per
provisions of the Electricity Act 2003. The Commission conveyed that ensuring
appropriate delegation of powers to MSLDC would be the first step towards achieving
the same. The Commission directed MSLDC to submit necessary proposal to MSETCL
for necessary approval.
2.3 MSLDC presented the salient features of the Petition including the capital expenditure
plan, staffing norms for typical SLDC, achievement, status of compliance with the
recommendations of the Gireesh Pradhan Committee Report and the operating cost
budget.
2.4 In response to the Commission’s observation on autonomy of operations, MSLDC
submitted that as per directives issued by the Commission in the Budget Order for FY
2013-14, MSLDC has resubmitted the proposal for ring-fencing of SLDC operations by
formation of a subsidiary company vide ref No. CE/SLDC/MSETCL/KLW/2079 dated
25 September, 2013 to the MSETCL corporate office. The same is under consideration
and will be forwarded to the MSEB Holding Company again. The Commission noted
the submission and emphasized the importance of the matter once again to MSLDC as
these are requirements under the Electricity Act, 2003 as well as being recommended
by the Gireesh Pradhan Committee.
Approval of Annual Budget of MSLDC for FY 2014-15
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2.5 MSLDC also updated the Commission regarding the status of the capital expenditure
plans of MSLDC, plans for training the employees and status of the incentive scheme
which has already been approved by the Commission in-principle in Case No. 181 of
2011.
2.6 MSLDC updated the Commission regarding the manpower status at the three locations
(Kalwa, Trombay and Ambazari). The Commission noted that the actual staff strength
of MSLDC for FY 2012-13 was 113 and at present the actual staff strength at MSLDC
is further reduced to 109.
2.7 MSLDC submitted the various SLDC fees and charges applicable to the various
Licensees as approved in the previous Budget Order. The Commission observed that
the prevalent fees and charges are those approved prior to the year 2005 and hence,
there was a need for MSLDC to review the charges prevalent in other States across the
country so as to align the charges existing in Maharashtra with other States.
2.8 Accordingly, the Commission directed MSLDC to submit the revised Petition
incorporating all the required changes and information on or before 15 January, 2014.
2.9 List of persons who attended the TVS is enclosed at Appendix – I.
3 Public Hearing
3.1 The Commission admitted the Petition of MSLDC on 16 January, 2014 under
Regulation 51 of the MERC (Conduct of Business) Regulations, 2004 for further
processing and conduct of Public Hearing and directed MSLDC to publish a Public
Notice under Section 64(2) of the Electricity Act, 2003 inviting suggestions/objections
from the public.
3.2 Accordingly, MSLDC published the notice in two Marathi (Loksatta and Navshakti)
and two English (The Times of India and DNA) newspapers on 18 January, 2014.
3.3 The Commission scheduled a Public Hearing on MSLDC’s Petition on 11 February,
2014. During this Public Hearing process, the representatives from MSLDC were
unable to respond to the queries raised by the Commission regarding the budget
Petition and hence the hearing was adjourned by the Commission and the Public
Hearing was scheduled for 25 February, 2014.
3.4 The Commission directed MSLDC to issue a short public notice with the details of the
date and time of the next Public Hearing. Accordingly, MSLDC published the notice in
two Marathi newspapers viz. Lokmat and Punyanagari on 16 February, 2014 and two
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 10 of 56
English newspapers viz. The Times of India and The Indian Express on 17 February,
2014.
3.5 The Commission held the Public Hearing on MSLDC’s Petition on 25 February, 2014.
During the hearing, MSLDC presented its case for approval of the operational budget
for FY 2014-15 as required under Regulation 18.1 of the MERC (Transmission Open
Access) Regulations, 2005. The highlights of the presentation are outlined below:
a) Summary of the expenditure and revenue realisation for True-up for FY 2012-13
MSLDC’s representative outlined the comparison between the values approved
during provisional True-up in previous year’s budget Order in Case No. 133 of
2012 and the actual values as per the audited financial statements of MSLDC. It
was submitted that major changes were recorded in the following items:
Employee expenses increased by 7% i.e. Rs. 67.15 lakh out of which
approximately Rs. 40 lakh is due to revision in D.A. twice during the year
wherein the DA has increased from 58% of basic salary to 72% of basic
salary and balance increase of approximately Rs. 25 lakh is on account of
increase in terminal benefits due to retirement of employees.
FY 2012-13 was a transition period for SLDC Kalwa since the new Kalwa
SLDC building was occupied in September 2012. As a result, 5% increase in
A&G expenses has occurred due to increase in electricity charges and
maintenance and upkeep charges of new SLDC building along with the old
building.
The reason for decrease in the R&M expenses was due to the fact that the
old SCADA system was discontinued and hence cost for its AMC was
discontinued whereas the new SCADA system being under warranty, no
AMC cost was incurred for the same.
It was submitted that the reason for decrease in all the heads of the Capital
Charge Budget viz. Depreciation, Interest & Finance charges and Return on
Equity was due to the fact that planned capitalisation of assets could not
happen as envisaged in the previous Order. It was submitted that though the
schemes were complete and the assets are being used, the financial closure
of schemes could not be achieved as certain contractor payments were
pending.
Further, MSLDC submitted that the variation in the revenue components
was mainly observed in the transactional heads such as connection fees,
scheduling charges, rescheduling charges and other receipts etc. which is
beyond the control of MSLDC.
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MSLDC also outlined the status of the Capex schemes for FY 2012-13 and
submitted that four DPR schemes i.e. replacement of existing RTUs,
establishment of Balancing & Settlement software, construction of SLDC
control room building at Kalwa and renovation of existing building at
ALDC, Ambazari shall be completed and capitalized in FY 2013-14.
b) Summary of the revised estimates of expenditure and revenue for provisional
True-up for FY 2013-14
MSLDC’s representative outlined the comparison between the values approved
for FY 2013-14 in previous year’s budget Order in Case No. 133 of 2012 and
the revised estimates submitted in the current Petition. It was submitted that
major changes were recorded in the following items:
There is a reduction in the revised estimates of employee expenses to the
tune of Rs. 154.35 lakh because the approved employee expenses are based
on sanctioned strength for the full year while the revised estimates considers
actual values for the first half of the financial year and sanctioned strength
for the second half of the financial year. Moreover, incentives of 30% were
considered pursuant to the acceptance of the recommendations of the
Gireesh Pradhan Committee whereas MSETCL management has approved
only a 5% allowance towards incentives.
The increase in A&G expenses by an amount of Rs. 67.29 lakh is due to the
increase in electricity charges and maintenance charges of the new SLDC
building and insurance for new SCADA system.
Increase in the R&M expenses of approximately Rs. 55.64 lakh is on
account of AMC of servers for FBSM and air-conditioning plant of new
building and renovation of staff quarters.
Further, it was submitted that there was lower capitalisation in FY 2012-13
vis-à-vis the capitalisation approved in the Order for Case No. 133 of 2012
since the provisional budget considered the capitalisation of new SLDC
building, FBSM software and replacement of RTUs in FY 2012-13. The
same could not be completed in FY 2012-13 and is now envisaged to be
completed in FY 2013-14. This has led to reduction in the expenses
pertaining to depreciation, interest on loans and return on equity which are
all linked to the capitalisation of assets.
MSLDC also outlined the status of the implementation of the Capex schemes
for FY 2013-14 and submitted that four DPR schemes i.e. replacement of
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 12 of 56
existing RTUs, establishment of Balancing & Settlement software, construction
of SLDC control room building at Kalwa and renovation of existing building at
ALDC, Ambazari shall be completed and capitalized in FY 2013-14 whereas the
implementation of the Capex scheme for enhancement of real time data
acquisition shall spill over to the next financial year. Further, administrative
approval for three Capex schemes viz. energy accounting system, off-line
system and infrastructure development has been accorded by MSETCL and
process for submission of DPRs to the Commission is in progress.
c) MSLDC submitted that its total budget for FY 2014-15 was Rs. 3992.61 lakh
out of which Rs. 2821.31 lakh was Operating Cost Budget and Rs. 1171.30 lakh
was Capital Charge Budget. This budget was based on full sanctioned strength
of employees i.e. 141 employees. Further, after adjustments of revenue surplus
of previous years to the tune of Rs. 233.33 lakh for FY 2012-13 and Rs. 550.48
lakh for FY 2013-14, the revenue to be recovered through SLDC fees and
charges is Rs. 3208.79 lakh.
d) MSLDC further outlined the principles as well as the mechanism of recovery of
fees and charges from the distribution Licensees of the State of Maharashtra.
e) Finally, MSLDC submitted the prayers made to the Commission in its Petition
and submitted that the Commission may consider the revision of various
transactional charges such as connection/registration fees, scheduling and re-
scheduling charges and STOA application processing fees as proposed in the
Petition.
f) The Commission observed that in order to achieve autonomy of operations, the
MSLDC needs to demonstrate its readiness in terms of independent financial
operational management. The Commission was of the view that along with
adequate operational competence, there is a need for strengthening the Finance
and Administrative wings of SLDC without which it would be difficult to
achieve autonomy of operations. The Commission also noted that there were
significant number of vacancies against sanctioned posts in SLDC which can
hamper the overall working of SLDC.
g) In view of the above, the Commission observed that there is need for SLDC to
consider the above mentioned aspects seriously and accordingly directed
MSLDC to provide information regarding the training and certification
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 13 of 56
planning, manpower recruitment plan, training programs for new employees
along with the related expenditure considered for these elements in the budget
Petition submitted by MSLDC through an addendum to the Petition filed by
MSLDC within one week of the Public Hearing for enabling processing and
disposal of the Petition.
In compliance with the directive of the Commission, MSLDC through its
submission dated 4 March, 2014 submitted the information as specified by the
Commission. The Commission has considered the same for the purpose of
approval of the Annual Budget for FY 2014-15. The same has been elaborated
in relevant paragraphs of the Order.
3.6 The representative from Thane Belapur Industries Association was present during the
Public Hearing conducted on 11 February, 2014.
3.7 None of the other stakeholders from distribution Licensees, generation companies were
present during the Public Hearing held on 11 February, 2014 and 25 February, 2014.
3.8 List of persons who attended the Public Hearing is enclosed at Appendix – I.
4 Approval of Revenue Budget
4.1 The Commission, in its Order for approval of MSLDC budget for FY 2006-07 in Case
No. 30 of 2005 has outlined the modalities for approval of SLDC budget as well as the
principles for recovery of MSLDC fees and charges. Accordingly, MSLDC revenue
budget comprises of two parts, viz.
Part -A : MSLDC Operating Cost Budget
Part -B : MSLDC Capital Charge Budget
4.2 Further, as elaborated earlier, the approval of the budget for FY 2013-14 and FY 2014-
15 will be guided by the provisions of the MERC (Multi Year Tariff) Regulations, 2011
and for FY 2012-13 by the provisions of the MERC (Terms and Conditions of Tariff)
Regulations, 2005, to the extent applicable.
Part – A: Operating Cost Budget
4.3 MSLDC’s Operating Cost Budget comprises of expenses such as (i) employee
expenses, (ii) administrative & general (A&G) expenses, (iii) repairs & maintenance
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 14 of 56
(R&M) expenses, (iv) interest on working capital, and (v) RLDC fees and WRPC
charges.
Employee Expenses
4.4 The details of employee related expenses actually incurred in FY 2012-13, revised
estimates for FY 2013-14 and projections for FY 2014-15, including financial burden
towards the incentive scheme, as submitted by MSLDC are shown in the following
table:
Table 4-1: Employee Expenses as submitted by MSLDC
(Rs. Lakh)
FY 2014-15
MERC Order
Provisional
True-up (Case
No. 133 of 2012)
Actual
MSLDC
Petition
(Case No.
133 of 2012)
MERC
Order (Case
No. 133 of
2012)
MSLDC
(Revised
Estimate)
MSLDC
Petition
Employee Expenses 982.98 1,050.13 1,173.74 1,324.35 1,170.00 1,460.22
Particulars
FY 2012-13 FY 2013-14
4.5 MSLDC submitted that as per audited accounts, the total employee expenses of
MSLDC for FY 2012-13 was Rs. 1050.13 lakh as against Rs. 982.98 lakh approved by
the Commission in the previous MSLDC Budget Order (Case No. 133 of 2012).
4.6 The MSLDC submitted that the increase in the actual employee expenses for FY 2012-
13 vis-à-vis figures approved by the Commission in the Budget Order for FY 2013-14
in Case no. 133 of 2012 was mainly on account of revision in Dearness Allowance
(DA) twice during the year wherein the DA has increased from 58% of basic salary to
72% of basic salary. This resulted in increase of expenses by around Rs. 40 lakh.
Further, there was an increase of approximately Rs. 25 lakh on account of increase in
outgo on account of the terminal benefits due to retirement of employees. These were
the two main reasons for increase employee expenditure in FY 2012-13 as against the
expenses approved by the Commission.
4.7 Considering the above, for the purpose of final Truing-up for FY 2012-13, the
Commission has considered the actual employee expenses of Rs. 1050.13 lakh as
submitted by MSLDC, which is based on actual employee strength of 113.
4.8 MSLDC submitted that for FY 2013-14, the estimate of total employee expenses is Rs.
1170.00 lakh. MSLDC clarified that the employee expenses for the period from April,
2013 to September, 2013 is based on the actual expenditure incurred during the said
period and the expenditure for the remaining period is estimated. It was also mentioned
that the burden in second half is higher, as the employee expenses for the first half of
FY 2013-14 are incurred for 109 employees i.e. the existing employee strength of
MSLDC and the expenses projected for the second half of FY 2013-14 are based on
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 15 of 56
sanctioned strength of 141 employees. The sanctioned strength considered for FY
2013-14 is as approved by the Commission in its Order in Case No. 133 of 2012 dated
22 March, 2013. MSLDC subsequently through an addendum submitted on 4 March,
2014 clarified that the employee strength was 111 as on 31 January, 2014. MSLDC
also clarified during discussions that the number of employees have been changing
during the year and have been around 111 on an average.
4.9 Subsequently, MSLDC through additional submissions in response to queries raised by
the Commission had revised the employee cost estimates for FY 2013-14 to Rs.
1172.50 lakh. This change was on account of changes in the expenses against the
incentive schemes which were wrongly considered in the original submission on
account of oversight. It was submitted that the figures mentioned for FY 2013-14 are as
per 5% allowance granted by MSETCL and considering the sanctioned employee
strength at Kalwa, Ambazari & Trombay. The incentive payment (ex-gratia) is as
declared by Government and the payment has been done in the month of October 2013.
4.10 The estimated financial burden towards incentives is Rs. 14.96 lakh for FY 2013-14
based on the 5% allowance granted by MSETCL.
4.11 For FY 2014-15, for the purpose of computation of the expenses, MSLDC has
considered sanctioned strength of 141 employees.
4.12 The indirect expenses like DA, HRA, PF and Provision for PF which are derived from
basic salary have been calculated based on the appropriate percentages for the purpose
of estimation of the related expenses.
4.13 MSLDC has submitted that the terminal benefits include the provision for Provident
Fund and the Gratuity payments. The provision for Gratuity has been derived from
expenses, whereas the provision for PF has been calculated as 12% on Basic Pay plus
Dearness Allowance. MSETCL has introduced the SAP system w.e.f. F.Y.2011-12
hence, Gratuity is shown in the book of accounts of MSETCL as a whole. However,
while showing Gratuity in MSLDC budget, it is shown on actual basis, i.e., actual
employee strength.
4.14 In addition to the above, MSLDC proposed a scheme for performance-linked incentives
and certification-linked incentives for MSLDC personnel. The estimated financial
burden towards incentives is Rs. 129 lakh in FY 2014-15. This has been considered in
lieu of the 5% allowance which has been presently approved by the MSETCL
management.
4.15 In response to the queries raised by the Commission regarding implementation of
incentive scheme for MSLDC employees during the Public Hearing held on 25
February, 2014, MSLDC through an addendum have submitted a revised incentive
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 16 of 56
scheme proposed to be implemented for FY 2014-15. As per the proposed scheme,
MSLDC proposes the following incentives:
(a) SLDC Allowance of 10% of Basic Pay w.e.f. 1 April, 2014, payable on posting to
all employees of MSLDC. Earlier, this allowance was being paid only to technical
staff @ of 5% of basic pay of the respective employees of MSLDC;
(b) Remaining 20% incentive out of 30% approved by Commission will be treated as
Performance related pay and will be provided to employees covered by the
performance appraisal scheme. This will be applicable as 20% of basic if concerned
employee performance is above 85% as also 85% for MSLDC performance in the
due course of time;
(c) Certification Linked incentives will be provided to Engineers undergoing
certification obtained from NPTI.
4.16 Based on the same, MSLDC requested Commission to consider revised expenditure on
account of the above proposed scheme as per the details given below:
LD Allowance – Rs. 41.63 lakh
Performance related pay – Rs. 60.87 lakh
Certification linked Incentive Scheme – Rs. 33.95 lakh
TOTAL INCENTIVE - Rs. 136.45 lakh
4.17 As regards imparting training to SLDC employees, MSLDC has submitted that NPTI
has started basic level certification training courses for LDCs as per the
recommendations of the Satnam Singh Committee and SLDC is deputing employees
for the same and some employees have already completed the training successfully. In
FY 2012-13, a total of 18 engineers had been deputed for basic training courses in 4
batches, out of which 11 engineers had appeared for the exams and passed them. For
Specialised Level training 5 employees were deputed and 7 employees have appeared
for the exam. Accordingly, as per the Committee recommendations these employees
are entitled for certification-linked incentive.
4.18 MSLDC is now regularly deputing its personnel for basic level training and
certification conducted by NPTI, Bangalore and aims to impart training to every
engineer working in SLDC. Remaining employees requiring basic level training will be
deputed to NPTI, Bangalore next year as per the programme notified by the institute.
Subsequently, advanced level training and certification programme will be introduced
by NPTI. The details of the employees trained till date is as follows:-
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 17 of 56
Table 4-2: Details of System Operator Training conducted at NPTI
Year FY 2012-13 FY 2013-14 FY 2014-15 (Planned)
Basic
Level
Specia
-list
Level
Total Basic
Level
Specia
-list
Level
Total Basic
Level
Specia
-list
Level
Total
No. of Officers
Trained 21 5 26 11 11 22 15 15 30
No. of Officers
Appeared for
exam
14 7 21 N.A. N.A. N.A. N.A. N.A. N.A.
No. of Officers
Passed 14 3 17 N.A. N.A. N.A. N.A. N.A. N.A.
No. of Officers
Failed 0 4 4 N.A. N.A. N.A. N.A. N.A. N.A.
4.19 In response to the queries raised by the Commission regarding the training for
employees of MSLDC during the Public Hearing held on 25 February, 2014, MSLDC
through an addendum have submitted a revised training program proposed to be
implemented for FY 2014-15. As per the submission, MSLDC has identified trainings
which will be provided to the employees so as to enable them to keep pace with the
current demands in the Indian Power Sector and also keep them updated with
developments in the International Power sector. In view of the same, MSLDC has
requested Commission to consider a revised training budget of Rs. 73.15 lakh in place
of Rs. 15.45 lakh already considered in the petition submitted by the MSLDC.
4.20 For approval of employee expenses for FY 2013-14, the Commission has considered
the employee strength at 111 employees for the entire year as against 141 employees
considered by MSLDC for the second half of the year. The Commission had sought
information from MSLDC regarding employee strength vide data gap Set 2 on 30
December, 2013. MSLDC in response to the data gaps had confirmed that the
employee strength was 113 in FY 2012-13 and 109 presently i.e. till January 2014. As
discussed in paragraph 4.8, MSLDC had subsequently revised the number of
employees to 111. Further, the final proposal for the staffing requirement of MSLDC
submitted to MSETCL was still pending approval till the date of the Public Hearing. In
view of this, the Commission considered it appropriate to approve the estimated
employee expenditure for FY 2013-14 based on existing employee strength of 111.
Any impact on account of additional employees joining prior to end of the present
financial year, i.e., FY 2013-14 can be considered at the time of Truing-up for FY
2013-14.
4.21 Further, for approving the employee expenses in FY 2013-14, the Commission in line
with the approach adopted in the previous Budget orders has considered increase at the
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 18 of 56
rate of 9.63 % per annum in various components of the approved employee expense for
FY 2012-13 to offset the inflationary increases. The inflation factor of 9.63 % p.a. is
based on Consumer Price Index (CPI). The Commission has considered the point to
point CAGR between March 2010 and March 2013 in the CPI for Industrial Workers
(as published by Labour Bureau, Government of India) to smoothen the inflation curve.
Further, the ‘Prior Period Expense’, Gratuity and ‘Leave Encashment on Retirement’
expenses have been approved as proposed by MSLDC. Provident fund has been
estimated as 12% of the Basic plus dearness allowance as proposed by MSLDC. The
Commission has also provided necessary impact of reduction in the employee strength
from 113 in FY 2012-13 to 111 in FY 2013-14 while approving the expenses.
4.22 In addition to the above, the Commission has also approved expenses on account of the
additional incentive approved by the MSETCL management w.e.f. 1 January, 2013 as
proposed by MSLDC.
4.23 Accordingly, the Commission has approved Rs. 1170.10 lakh as the employee expenses
for FY 2013-14 as part of the provisional True-up.
4.24 For FY 2014-15, in line with the approach adopted previously, the Commission has
considered it appropriate to escalate the approved O&M expenses for the FY 2013-14
using appropriate escalation indices derived using the WPI and CPI. Accordingly, for
approving the employee expenses in FY 2014-15, the Commission has considered
increase at the rate of 8.91 % per annum in various components of the approved
employee expense for FY 2013-14 to offset the inflationary increases. The inflation
factor of 8.91 % p.a. is based on Consumer Price Index (CPI). The Commission has
considered the point to point CAGR between December, 2010 and December, 2013 in
the CPI for Industrial Workers (as published by Labour Bureau, Government of India)
to smoothen the inflation curve. As regards projection of number of employees, the
Commission has considered MSLDC’s projections in line with sanctioned strength of
141 employees. Further, Gratuity, and Leave Encashment on Retirement expenses have
been approved as proposed.
4.25 As regards the expenses against performance linked and certification linked incentives,
MSLDC had retained the estimates as per the original proposal which was prepared in
line with the recommendations of the Gireesh Pradhan Committee and submitted to
MSETCL management for approval. While the MSETCL management had approved
5% of the basic pay as the additional incentive w.e.f. from 1 January, 2013, MSLDC
has submitted that the MSETCL management has initiated steps along the lines of the
recommendations of the Gireesh Pradhan Committee and hence, retained the incentive
expenses in line with the original proposal for the FY 2014-15.
4.26 The Commission in its previous Orders had opined that it is agreeable in principle with
the idea that a suitable incentive scheme needs to be implemented for the MSLDC staff
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 19 of 56
on the lines of the Gireesh Pradhan Committee recommendations in Order to retain and
attract the right talent. Accordingly, the Commission had approved the proposal related
to the incentive schemes in principle in the Order in Case no. 181 of 2011 dated 30
March, 2012.
4.27 As mentioned in paragraph 4.15 of the Order, MSLDC has proposed a revised incentive
scheme to be implemented in FY 2014-15. The Commission intends to continue with
the in-principle approval granted in the previous Orders and accordingly approves the
expenses towards incentive schemes as proposed by MSLDC for the FY 2014-15. The
Commission directs MSLDC to take up the matter with MSETCL management to get
the necessary approvals for implementing the scheme.
4.28 Accordingly, the summary of approved employee expenses is given in the Table below:
Table 4-3: Approved Employee Expenses
(Rs. Lakh)
MSLDC
(Actual)
Allowed
after
Truing-up
MSLDC
(Revised
Estimate) #
ApprovedMSLDC
(Petition) # Approved
Employee Expenses 1,050.13 1,050.13 1,172.50 1,170.10 1,573.93 1,594.14
Particulars
FY 2012-13 FY 2013-14 FY 2014-15
Final Truing-up Provisional Truing-up Budget
# Revised expenditure based on information submitted by MSLDC vide addendum dated 4 March, 2014
Administration and General Expenses
4.29 The details of A&G expenses actually incurred in FY 2012-13, revised estimates for
FY 2013-14 and projections for FY 2014-15 as submitted by MSLDC, are shown in the
following table:
Table 4-4: A&G Expenses submitted by MSLDC
(Rs. Lakh)
FY 2014-15
MERC Order
Provisional
True-up (Case
No. 133 of 2012)
Actual
MSLDC
Petition
(Case No.
133 of 2012)
MERC
Order
(Case No.
133 of 2012)
MSLDC
(Revised
Estimate)
MSLDC
Petition
A&G
Expenses345.17 362.96 354.04 374.44 441.73 456.14
Particulars
FY 2012-13 FY 2013-14
4.30 MSLDC submitted that the actual A&G expenses incurred during FY 2012-13 amounts
to Rs. 362.96 lakh as against Rs. 345.17 lakh approved by the Commission during
provisional true up for FY 2012-13. MSLDC has submitted that FY 2012-13 was a
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 20 of 56
transition period for SLDC Kalwa since the new Kalwa SLDC building was occupied
in September 2012 and hence the actual A&G expenses for FY 2012-13 has increased
vis-à-vis the approved figures in its Petition. As a result, 5% increase in A&G expenses
has occurred mainly due to increase in the electricity charges and maintenance and
upkeep charges of new SLDC building along with the old building.
4.31 Considering the same, for the purpose of final Truing–up, the Commission has
considered the actual A&G expenses as submitted by MSLDC in line with audited
proforma accounts.
4.32 MSLDC submitted that the actual A&G expenses for the period April, 2013 to
September, 2013 is Rs. 226.85 lakh and the estimated expenses for the period October,
2013 to March, 2014 is Rs. 214.88 lakh. The revised estimate for A&G expenses for
FY 2013-14 is Rs. 441.73 lakh as against the Commission approved figure of Rs.
374.44 lakh. MSLDC has submitted that the significant increase in the estimated A&G
expenses of Rs. 441.73 lakh in FY 2013-14 vis-à-vis the actual A&G expenses of Rs.
362.96 lakh incurred in FY 2012-13 is due to the increase in electricity charges and
maintenance charges of the new SLDC building which is now operational and
insurance for new SCADA system. Further the housekeeping expenses towards the
maintenance of the new building have increased.
4.33 The Commission examined the reasons given by MSLDC to justify the increase in
A&G expenses. It is apparent that the expenditure pertaining to electricity charges,
upkeep of the office and other expenses like insurance charges, rent, etc. has increased
substantially as compared to the previous year and the reasons provided by MSLDC for
the increases appear to be valid considering the fact that the new building is operational
and hence related expenditure has increased. Accordingly, the Commission has
approved expenses pertaining to insurance, electricity charges and upkeep of office
premises as proposed for the FY 2013-14. For all the other expenses forming part of the
A&G expenses, the Commission has considered inflationary impact of 8.45 % p.a. over
FY 2012-13 based on the increase in Wholesale Price Index (WPI) and Consumer Price
Index (CPI), for the purpose of provisional Truing-up of A&G expenses for FY 2013-
14. For the purpose of computation of percentage of inflationary impact, the
Commission has considered the weighted average CAGR of Consumer Price Index for
Industrial Workers1 (40% weight) and Wholesale Price Index
2 (60% weight) between
March, 2010 and March, 2013 to smoothen the inflation curve. The Commission has
considered a weight of 60% to WPI and 40% to CPI, based on the expected relationship
with the cost drivers.
4.34 Based on the above, the total amount of A&G expenses approved by the Commission
for FY 2013-14 is Rs. 453.07 lakh.
1 As published by Labour Bureau, Government of India
2 As published by Office of Economic Advisor of Govt. of India
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 21 of 56
4.35 For FY 2014-15, MSLDC has projected the A&G expenses as Rs. 456.14 lakh, out of
which Rs. 336.93 lakh is projected for MSLDC (Kalwa), and Rs. 119.21 lakh is
projected for ALDC (Ambazari). As discussed in paragraph 4.19 of the Order, MSLDC
has revised the expenditure envisaged towards training expenses and accordingly, the
A&G expenses projected by MSLDC for FY 2014-15 will increase to Rs. 513.84 lakh.
4.36 As discussed in the section pertaining to approval of the employee expenses, the
Commission has considered it appropriate to consider increase in various components
on account of inflation at the rate of 7.81 % per annum over the revised approved
estimate of A&G expenses (after provisional True-up) for FY 2013-14 except in case of
the training expenses which have been approved as proposed by MSLDC. For the
purpose of computation of percentage of inflationary impact, the Commission has
considered the weighted average CAGR of Consumer Price Index for Industrial
Workers (40% weight) and Wholesale Price Index (60% weight) between December
2010 and December 2013 to smoothen the inflation curve. The Commission has
considered a weight of 60% to WPI and 40% to CPI, based on the expected relationship
with the cost drivers.
4.37 The summary of approved A&G expenses is given in the table below:
Table 4-5: Approved A&G Expenses
(Rs. Lakh)
MSLDC
(Actual)
Allowed
after
Truing-up
MSLDC
(Revised
Estimate)
ApprovedMSLDC
(Petition) # Approved
A&G
Expenses362.96 362.96 441.73 453.07 513.84 548.15
Particulars
FY 2012-13 FY 2013-14 FY 2014-15
Final Truing-up Provisional Truing-up Budget
# Revised expenditure based on information submitted by MSLDC vide addendum dated 4 March, 2014
Repairs and Maintenance Expenses
4.38 The details of R&M expenses actually incurred in FY 2012-13, revised estimates for
FY 2013-14 and projections for FY 2014-15, as submitted by MSLDC are shown in the
following table:
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 22 of 56
Table 4-6: R&M Expenses submitted by MSLDC
(Rs. Lakh)
FY 2014-15
MERC Order
Provisional
True-up (Case
No. 133 of 2012)
Actual
MSLDC
Petition
(Case No.
133 of
2012)
MERC
Order
(Case No.
133 of 2012)
MSLDC
(Revised
Estimate)
MSLDC
Petition
R&M
Expenses104.21 66.34 113.50 110.97 166.61 210.00
Particulars
FY 2012-13 FY 2013-14
4.39 MSLDC submitted that the actual R&M expenses incurred during FY 2012-13 as per
audited accounts are Rs. 66.34 lakh. The Commission approved Rs. 104.21 lakh as the
R&M expenses during the provisional True-up for FY 2012-13 (Case No. 133 of 2012).
MSLDC vide response to data gap Set 2 on 8 January, 2014 has submitted the reasons
for this variation in the R&M expenses as compared to the approved expenses. The
main reason for the variation is on account of some Annual Maintenance Contracts
(AMC) for elements like air conditioning, civil maintenance of new and old building,
etc. which have not materialised in the FY 2012-13 even though the new building is put
to operational use. Hence, the R&M expenditure incurred is Rs.66.34 lakh as compared
to approved amount of Rs.104.21 i.e. lesser by Rs.37.87 lakh.
4.40 The Commission for the purpose of final Truing–up for FY 2012-13, has considered
and approved the actual R&M expenses as submitted by MSLDC.
4.41 For FY 2013-14, MSLDC submitted that the actual R&M expenses for the period from
April, 2013 to September, 2013 is Rs. 33.27 lakh and the estimated figure for the period
from October, 2013 to March, 2014 is Rs. 133.34 lakh. MSLDC submitted that the
difference in the expenses in the two halves of the year is due to Annual Maintenance
Contract (AMC) for servers for the FBSM, Air Conditioning plant of the new building
and renovation of staff quarters falls due for payment in the latter half of the year. The
revised estimate for R&M expenses for FY 2013-14 is Rs.166.61 lakh as against the
Commission approved figure of Rs.110.97 lakh and the difference is mainly on account
of AMC related matters.
4.42 The Commission in the previous Order in Case No. 133 of 2012 had opined that it is
important to ensure that the accounting of expenses is undertaken appropriately under
relevant heads of expenses as per prudent accounting practice as the same also enables
the Commission to approve expenses looking at the nature of such expenses. In the
present Petition also it has been observed that the expenses are mainly clubbed under
the head Plant & Machinery. It becomes difficult to understand the expenses being
incurred under this head. Accordingly, the Petitioner is directed to give details of the
expenditure (type of expenditure and the amount) being incurred under this head
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 23 of 56
separately in the next Petition so as to enable the Commission to comprehend the
expenditure being incurred under this head and accordingly approve the same.
4.43 For the purpose of provisional Truing-up for FY 2013-14, the Commission has
considered an inflationary impact (based on the increase in Wholesale Price Index
(WPI) of 7.66% p.a. over FY 2012-13, except for the R&M expense under the head
Plant & Machinery and Building. The R&M expenses under the head ‘Plant &
Machinery’ and ‘Buildings’ has been accepted as proposed by MSLDC as the increases
are mainly envisaged on account of AMC’s not materialising in the past year and which
are likely to materialise this year. The Commission has considered the point to point
CAGR between March, 2010 and March, 2013 in the WPI (as published by Office of
Economic Advisor of Govt. of India) to smoothen the inflation curve. Accordingly, the
Commission has approved R&M expense of Rs. 164.25 lakh after provisional True-up
for FY 2013-14.
4.44 For FY 2014-15, MSLDC has projected R&M expenses as Rs. 210.00 lakh, out of
which Rs. 163.00 lakh is projected for Kalwa and Rs. 47.00 lakh is projected for
Ambazari. MSLDC submitted that the total estimation of R&M Expenses for FY 2014-
15 is based on a detailed analysis of various components of R&M for both Kalwa as
well as Ambazari units and is higher on account of the AMC for the new SCADA
system and civil maintenance of the new SLDC building and staff quarters.
4.45 For projecting and approving the R&M expenses for FY 2014-15, the Commission has
considered increase in various components on account of inflation at the rate of 7.07%
p.a. over the revised estimate of R&M expense (approved after provisional True-up) for
FY 2013-14. Based on the discussion elaborated during approval of the employee
expenses for FY 2014-15, the Commission has considered the escalation rate based on
the point to point CAGR between December, 2010 and December, 2013 in the WPI (as
published by Office of Economic Advisor of Govt. of India) to smoothen the inflation
curve. The summary of approved R&M expenses is given in the table below:
Table 4-7: Approved R&M Expenses
(Rs. Lakh)
MSLDC (Actual)
Allowed
after
Truing-up
MSLDC
(Revised
Estimate)
ApprovedMSLDC
(Petition) Approved
R&M
Expenses 66.34 66.34 166.61 164.25 210.00 175.86
Particulars
FY 2012-13 FY 2013-14 FY 2014-15
Final Truing-up Provisional Truing-up Budget
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 24 of 56
Interest on Working Capital
4.46 The normative interest on working capital for FY 2012-13, revised estimates for FY
2013-14 and projection for FY 2014-15, as submitted by MSLDC, is shown in the
following table:
Table 4-8: Interest on Working Capital as submitted by MSLDC
(Rs. Lakh)
FY 2014-15
MERC Order
Provisional
True-up (Case
No. 133 of 2012)
Actual
MSLDC
Petition
(Case No.
133 of 2012)
MERC
Order
(Case No.
133 of
2012)
MSLDC
(Revised
Estimate)
MSLDC
Petition
Interest on
Working Capital63.54 64.99 74.38 79.02 78.57 92.01
Particulars
FY 2012-13 FY 2013-14
4.47 MSLDC submitted that it has considered the methodology provided in MERC (Terms
and Conditions of Tariff) Regulations, 2005 for computation of working capital
requirement and interest on working capital for FY 2012-13 However, for the
calculation of interest on working capital for FY 2013-14 and FY 2014-15, the
methodology prescribed in the MERC (Multi Year Tariff) Regulations, 2011 has been
adopted. Further, the Operating Cost Budget alone has been considered as per
Commission’s directive in this regard in the MSLDC Budget Order (Case No. 30 of
2005) where it has been stated under paragraph 34 as under on interest on working
capital:
“Accordingly, receivables corresponding to operating cost budget only need to be
accounted for”.
4.48 MSLDC further submitted that interest has been considered at a rate equal to the Short
Term Prime Lending Rate (PLR) of the State Bank of India (SBI) prevailing on the date
on which the application for determination of charges is made.
4.49 Further, MSLDC added that interest on working capital shall be payable on
normative basis notwithstanding that MSLDC has not taken any working capital loan
from any outside agency.
4.50 Based on the detailed computation submitted by MSLDC as part of its submission, it is
evident that MSLDC has used 14.50%, 14.63% and 14.75% rate of interest for the
purpose of computation of the interest on working capital.
4.51 The MERC Tariff Regulations, 2005 and MERC MYT Regulations, 2011 prescribe that
the SBI Short Term Prime Lending Rate and the SBI Advance Rate, respectively, as on
the date on which the application for determination of Tariff is made have to be used
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 25 of 56
for the computation of the interest on working capital. Accordingly, rate of interest
used by the Commission for the purpose of computation of the interest on working
capital for the respective years is given below:
Table 4-9: Interest Rates for Working Capital
Particulars FY 2012-13 FY 2013-14 FY 2014-15
Interest Rate for Working Capital 14.75 % 14.50 % 14.75 %
4.52 For the purpose of final Truing-up for FY 2012-13, the Commission has considered the
parameters in accordance with the provisions of MERC (Terms and Conditions of
Tariff) Regulations, 2005. For the purpose of the provisional Truing-up of FY 2013-14
and projections for the FY 2014-15, the Commission has referred to the provisions of
the MERC (Multi Year Tariff) Regulations, 2011. Based on the same, the working
capital approved for the respective years is as given below:
Table 4-10: Approved Interest on Working Capital
(Rs. Lakh)
MSLDC
(Actual)
Allowed
after
Truing-up
MSLDC
(Revised
Estimate)
ApprovedMSLDC
(Petition) # Approved
Interest on
Working Capital64.99 65.01 78.57 75.79 97.28 95.72
Particulars
FY 2012-13 FY 2013-14 FY 2014-15
Final Truing-up Provisional Truing-up Budget
# Revised expenditure based on information submitted by MSLDC vide addendum dated 4 March, 2014
RLDC Fees and WRPC charges
4.53 MSLDC has booked RLDC fees and WRPC charges of Rs. 596.21 lakh (including
WRPC fees and charges of Rs. 9.86 lakh) for FY 2012-13. MSLDC has stated that the
charges towards RLDC fees are being paid by MSEDCL against the invoices raised by
RLDC to MSEDCL. After payment, MSEDCL claims those charges from MSLDC and
the same are being paid by MSLDC to MSEDCL. The above mentioned charges are
based on actual payment made on account of RLDC fees and charges during FY 2012-
13. The same have been accepted by the Commission.
4.54 MSLDC has further stated that CERC has passed an Order in the matter of Petition No.
92 of 2010 dated 11 March, 2011 for approval of fees and charges of WRLDC for the
period April, 2009 to March, 2014. Additionally, MSLDC is also paying Rs.10.00 lakh
(approx.) per year on account of WRPC’s Secretariat charges. Accordingly, the total
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 26 of 56
RLDC fees and WRPC charges for FY 2013-14 and FY 2014-15 is estimated to be Rs.
602.93 lakh.
4.55 Based on the above, the Commission approves RLDC fees and WRPC charges of Rs.
596.21 lakh (including WRPC fees and charges of Rs. 9.86 lakh per year) for FY
2012-13 and Rs. 602.93 lakh as projected by MSLDC for FY 2013-14 and FY 2014-
15, as shown in the Table below:
Table 4-11: Approved RLDC fees and WRPC Charges
(Rs. Lakh)
MSLDC
(Actual)
Allowed
after
Truing-up
MSLDC
(Revised
Estimate)
ApprovedMSLDC
(Petition) Approved
RLDC fees and
WRPC Charges596.21 596.21 602.93 602.93 602.93 602.93
Particulars
FY 2012-13 FY 2013-14 FY 2014-15
Final Truing-up Provisional Truing-up Budget
Part – B: MSLDC Capital Charge Budget
4.56 MSLDC Capital Charge Budget comprises of (i) Depreciation, (ii) Interest on long term
loan capital, and (iii) Return on equity, and these components are linked to Gross Fixed
Assets as well as capital expenditure proposed to be capitalised during the year.
4.57 MSLDC submitted that it has prepared a 4-year Capex plan from 2013-14 to 2016-17
and included it as a part of this Petition. Capex heads as recommended by the
Committee on ‘Manpower Certification and Incentives for System Operations and Ring
Fencing of Load Despatch Centre (LDC’s)' constituted by MoP, Govt. of India have
been considered for preparation of the plan in consultation with WRLDC.
4.58 Further, MSLDC submitted that the total capital outlay of Rs. 3939 lakh has been
considered for a period of 4 years (including the current year). Out of Rs. 3939 lakh of
Capital Expenditure planned over the period of 4 years, Rs. 2575 lakh is the
expenditure planned for MSLDC Kalwa and Rs. 1364 lakh for Area Load Despatch
Centre at Ambazari.
4.59 The different schemes for which the Capex is being carried out are given below:
a. Replacement of existing RTUs and commissioning of additional RTUs & DCs
for Load Despatch Centres at Kalwa and Ambazari
b. Establishment of Balancing & Settlement Software at SLDC Kalwa for Intra
State ABT mechanism
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 27 of 56
c. Construction of new SLDC Control Room Building and Renovation of
existing building at State Load Despatch Centre Kalwa
d. Renovation of existing building at Area Load Despatch Centre Ambazari
e. Enhancement of SCADA system capabilities
f. Energy Accounting Systems
g. Off Line Systems
h. Infrastructure Development (Interior & Furnishing, Air-conditioning, Security
Systems, Testing equipment & tools, Furniture, Auxiliary supplies, etc.)
4.60 Out of the eight schemes proposed for FY 2013-14, four schemes (a-d) are in progress,
i.e., capital investment has been made partly in FY 2012-13. These schemes are
envisaged to be completed and capitalised during the FY 2012-13 & FY 2013-14.
Partial capital expenditure has also been incurred on the scheme ‘Enhancement of real
time data acquisition’ and the scheme ‘Infrastructure Development’ in FY 2012-13. No
capital expenditure has been incurred in FY 2012-13 on the other two schemes namely
Energy Accounting System and Offline System which have been included in the budget
for FY 2013-14.
4.61 The MSLDC submitted that the capital expenditure for FY 2012-13 was Rs. 2048.39
lakh and capitalisation was Rs. 1557.73 lakh. Out of capital expenditure of Rs. 2048.39,
capital expenditure of Rs. 1203.94 lakh was incurred for construction of new SLDC
control room and renovation of existing buildings of SLDC which will get capitalized
in FY 2012-13 & FY 2013-14.
4.62 MSLDC also submitted that the capital expenditure for FY 2013-14 will be Rs. 1816.65
lakh and capitalisation will be Rs. 3047.65 lakh. The status of implementation of the 4
major schemes which are likely to be capitalised during the FY 2013-14 is as outlined
below:
Table 4-12: Status of Capex Schemes FY 2013-14 as submitted by MSLDC
Sr.
No.
Scheme Name Present Status
1 Replacement of existing RTUs and
commissioning of additional RTUs
& DCs for Load Despatch Centres
at Kalwa and Ambazari
Upgradation of Hardware &
Software at LD centres.
RTU-DC Site work completed. System is taken over
for operation. Integration with SLDC could not be
done due to non-availability of communication
channels.
Communication Links to be made available from
substations to SLDC. Order already placed by
MSETCL.
2 Establishment of Balancing &
Settlement Software at SLDC
Kalwa for ABT mechanism
Functional from 1 August, 2011. FBSM bills have
been issued up to last week of Dec 2012.
Software issues to be resolved. Software to be
modified by L&T as per requirements.
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 28 of 56
Sr.
No.
Scheme Name Present Status
3 Construction of new SLDC Control
Room Building and Renovation of
existing building at State Load
Despatch Centre, Kalwa
Work Completed in all respects. Staff & equipment
are shifted to the new building. Financial closure of
the scheme is pending and will happen after
revalidation by MSETCL.
4 Renovation of existing building at
Area Load Despatch Centre,
Ambazari
Work Completed in all respects. Staff & equipment
are shifted to the renovated building. Financial
closure of the scheme is pending and will happen
after revalidation by MSETCL.
4.63 In addition to the above, the scheme pertaining to Enhancement of real time data
acquisition is also likely to be partly capitalised in FY 2013-14. The present status of
the scheme as submitted by SLDC is that the pilot project for WAMS has been
completed and order for additional hardware is placed on M/s Siemens.
4.64 The Commission had directed MSLDC to submit the break-up of the total capital
expenditure schemes into DPR schemes and the non-DPR schemes. Accordingly,
MSLDC has submitted the details. The summary of the same is given below:
Table 4-13: Capitalisation proposed by MSLDC
(Rs. Lakhs)
1
Replacement of existing RTUs and commissioning of
additional RTUs & DCs for Load Despatch Centres at
Kalwa and Ambazari
Approved 177.09 472.91 0.00 650.00
2Establishment of Balancing & Settlement Software at
SLDC Kalwa for Intra State ABT mechanismApproved 0.00 60.63 0.00 60.63
3
Construction of new SLDC Control Room Building and
Renovation of existing building at State Load Despatch
Centre Kalwa
Approved 1024.62 1282.04 0.00 2306.66
4Renovation of existing building at Area Load Despatch
Centre AmbazariApproved 331.18 123.23 0.00 454.41
5Enhancement of real time data acquisation-
Procurement of Hardware & software licencesApproved 0.00 342.00 0.00 342.00
6Enhancement of real time data acquisation- Cyber
security and data securityDPR to be submitted 0.00 0.00 140.00 140.00
7Infrastructure Development- Auxiliary supply
arrangements for new SLDC Building DPR to be submitted 0.00 100.00 250.00 350.00
8Energy accounting System- New FBSM Software &
StorageDPR to be submitted 0.00 0.00 100.00 100.00
Sub-Total 1532.89 2380.81 490.00 4403.70
9 Enhancement of Real Time Data Acquisition Capability 0.00 286.84 140.00 426.84
10 Energy Accounting System 0.00 95.00 54.50 149.50
11 Off-Line Systems 0.00 40.00 25.00 65.00
12 Infrastructure Development 24.84 245.00 242.50 512.34
Sub-Total 24.84 666.84 462.00 1153.68
Total 1557.73 3047.65 952.00 5557.38
Sr. No. Name of SchemeScheme Status
Submitted / ApprovedFY 2014-15 Total
DPR Schemes
Non DPR Schemes
FY 2012-13 FY 2013-14
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 29 of 56
4.65 It is observed that there are in all 8 DPR schemes of which 5 schemes are proposed to
be capitalised entirely by FY 2013-14. There are 3 DPR schemes which are proposed to
be capitalised in FY 2013-14 and FY 2014-15.
4.66 During the Public Hearing, MSLDC has submitted that the schemes proposed to be
capitalised in FY 2013-14 are either in advanced stages of completion or have been
completed however the same have not been capitalised in the books of accounts as the
financial closure of schemes was pending and final contractor payments were to be
made.
4.67 The Commission for the purpose of approval of the capitalisation for FY 2012-13 as
part of the truing up process has approved the capitalisation as proposed by MSLDC.
4.68 While approving the capitalisation as proposed by MSLDC, the Commission has taken
cognisance of the fact that the completed cost of schemes pertaining to construction of
the new SLDC control room building at Kalwa and renovation of the existing SLDC
buildings at Kalwa and Ambazari is higher than the cost in-principally approved by the
Commission at the time of approval of the DPR. The reasons provided by MSLDC for
increase in the capital cost are summarised below:
The estimates prepared by the appointed consultants were based on PWD DSR and
prevailing market rates for the year 2007-08. Due to price escalations during last 3
years in basic construction materials such as steel, cement, sand, bricks, copper,
aluminium etc. the estimated prices are much below the market prices.
Over the DSR estimated rates, the taxes like VAT, WCT, Octroi, Service Tax,
insurance etc., to the extent of 3-5% are to be considered.
Skilled and unskilled labour charges are drastically increased.
Material transportation charges are increased due to increase in fuel prices.
There were also certain changes in the quantities of tendered material which were
required for completion of the work.
Revision in the cost of solar system to Rs. 2 lakh/kW for 25 kW.
Cost incurred in shifting of EHV Line in the new Building area by Tata Power
Company;
Cost escalation on account of price escalation and increase in the interest during
construction.
4.69 The Commission has considered the above reasons provided by MSLDC and
accordingly approved the capitalisation as proposed by MSLDC for the said schemes.
4.70 As regards approval of the capitalisation for FY 2013-14, it is observed that MSLDC
has proposed capitalisation of Rs. 100 lakh against the DPR scheme pertaining to
“Infrastructure Development - Auxiliary supply arrangements for new SLDC
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 30 of 56
Building”. The Commission has noted that the DPR for the said scheme has not yet
been submitted and furthermore, the start date of the scheme was submitted as April
2014 whereas the capital investment of Rs. 350 lakh and capitalisation of Rs. 100 lakh
has been considered in FY 2013-14. MSLDC officials clarified that the capitalisation is
proposed in FY 2014-15 instead of FY 2013-14 as mentioned in the petition.
Considering the above facts, especially non-submission of the DPR for the said
scheme, the Commission has not considered the capitalisation towards this scheme in
FY 2013-14 and deferred it to the next financial year subject to submission of the
necessary DPR by MSLDC within three months from issue of this Order and taking
necessary approvals from the Commission.
4.71 As regards the non-DPR schemes proposed to be capitalised in FY 2013-14, the
Commission has considered the status of implementation as submitted by MSLDC in
its Petition and also the track record of MSLDC regarding capitalisation of the schemes
and taken the following decisions:
Energy Accounting System & Offline system: MSLDC has submitted that the
process of tendering is on-going in case of the said schemes and considering the
same, the Commission has not considered any capitalisation against these schemes
in FY 2013-14 and the same has been deferred to FY 2014-15.
Infrastructure development: Part of this scheme forms part of the DPR schemes
for which administrative approvals have been provided by MSETCL and DPR
preparation is under process. As far as the non-DPR portion of the scheme is
concerned, considering that no definitive progress of the implementation has been
provided, the Commission has considered 50% of the capitalisation proposed by
MSLDC for FY 2013-14. The remaining capitalisation has been deferred to the next
year i.e. FY 2014-15.
Enhancement of Real Time Data Acquisition Capability: Similarly, in case of
the said scheme, some components of the scheme form part of the DPR scheme and
some components of the scheme form part of the non-DPR scheme. The data
provided by MSLDC pertaining to the non-DPR scheme appears to be inaccurate as
cost of the scheme is mentioned as Rs. 318 lakh and the capital expenditure and
capitalisation proposed against the same is much higher. Subsequently, MSLDC
provided clarification that the capital expenditure relating to pilot scheme for
installation of PMU to the extent of Rs. 268.84 lakh was already undertaken in the
previous year and is over and above the scheme value of Rs. 318 lakh mentioned
the petition. It was submitted that the work against this scheme was complete and
hence it is proposed to capitalise the same in FY 2013-14. Further, the capital
expenditure incurred on the other elements of this non-DPR scheme is Rs. 18 lakh
as against Rs. 406.64 lakh mentioned in the response to data gaps Set 3 submitted
by MSDLC. In view of the above, the Commission has considered the capitalisation
as proposed by the MSLDC against the said scheme in FY 2013-14.
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 31 of 56
4.72 Thus, the Commission, based on MSLDC’s submissions and the discussions above,
approves the capitalisation of Rs. 2519.15 lakh for FY 2013-14.
4.73 For FY 2014-15, MSLDC has proposed total capital expenditure of Rs. 1064.00 lakh
out of which Rs. 709.00 lakh is towards capital expenditure for Kalwa and Rs. 355.00
lakh for MSLDC, Ambazari. Capitalisation for FY 2014-15 is proposed at Rs. 952.00
lakh.
4.74 There are two DPR schemes which have been proposed by MSLDC for capitalisation
in FY 2014-15. In addition, there is one more DPR scheme pertaining to infrastructure
development which was proposed by MSLDC for capitalisation in FY 2013-14, but the
same has been considered by the Commission for approval in FY 2014-15 as discussed
in paragraph 4.70 of the Order. The remaining schemes are non-DPR schemes.
4.75 In line with the recommendations of the Gireesh Pradhan Committee, MSLDC has
been submitting the capital expenditure plan and the Commission, after undertaking
prudence check, has been allowing a reasonable amount. However, the Commission
has in the past also observed that actual capitalisation has been lagging behind the
projected capitalisation over the past few years. This is visible in the present filing also
wherein the actual capitalisation in FY 2012-13 has been Rs. 1557.73 lakh as against
Rs. 3361.60 lakh approved by the Commission. The Commission had also suggested to
MSLDC that in order to achieve project execution on a faster track, necessary
inputs/expertise may be drawn from the parent organization. However, the progress on
this front has not been satisfactory.
4.76 Looking at the track record for implementation of schemes, the Commission has
considered that the opening capital work in progress for the FY 2014-15 will be
capitalised during the year and 50% of the capital expenditure during the year proposed
by MSLDC would be capitalised at the end of the year. Further, the Commission has
considered the deferred capitalisation of Rs. 100 lakh pertaining to the DPR scheme
“Infrastructure Development” in FY 2014-15.
4.77 Accordingly, the Commission approves capitalisation of Rs. 1360.50 lakh for the FY
2014-15. The Commission directs MSLDC to submit DPR for schemes over Rs.
100 lakh outlay proposed in FY 2014-15 within 3 months from issue of this Order.
MSLDC is also required to submit the cost benefit analysis reports for the non-
DPR schemes for FY 2013-14 within 3 months from issue of this Order.
4.78 Based on the above, the Commission approves capitalisation for FY 2012-13 to
FY2014-15 as shown in table below:
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 32 of 56
Table 4-14: Approved Capitalisation
(Rs. Lakh)
1Replacement of existing RTUs and commissioning of additional RTUs
& DCs for Load Despatch Centres at Kalwa and Ambazari 177.09 472.91 -
2Establishment of Balancing & Settlement Software at SLDC Kalwa
for Intra State ABT mechanism - 60.63 -
3Construction of new SLDC Control Room Building and Renovation of
existing building at State Load Despatch Centre Kalwa 1,024.62 1,282.04 -
4Renovation of existing building at Area Load Despatch Centre
Ambazari 331.18 123.23 -
5Enhancement of real time data acquisation - Procurement of
Hardware & software licences - 171.00 171.00
6Enhancement of real time data acquisation - Cyber security and data
security - - 70.00
7Infrastructure Development - Auxiliary supply arrangements for new
SLDC Building - - 350.00
8 Energy accounting System- New FBSM Software & Storage - - 85.00
Sub-Total 1,532.89 2,109.81 676.00
9 Enhancement of Real Time Data Acquisition Capability - 286.84 90.00
10 Energy Accounting System - - 164.50
11 Off-Line Systems - - 65.00
12 Infrastructure Development 24.84 122.50 365.00
Sub-Total 24.84 409.34 684.50
Total 1,557.73 2,519.15 1,360.50
Sr. No. Name of Scheme
DPR Schemes
Non DPR Schemes
FY 2012-13 FY 2013-14 FY 2014-15
4.79 Based on the above, the Gross Fixed Assets (GFA) of MSLDC for FY 2012-13 to FY
2014-15 as shown in table below:
Table 4-15: Gross Fixed Assets
(Rs. Lakh)
Sr. No. Particulars FY 2012-13 FY 2013-14 FY 2014-15
1 Opening GFA 4,989.37 6,547.10 9,066.25
2 Additions during the year 1,557.73 2,519.15 1,360.50
3 Retirements - - -
4 Closing GFA 6,547.10 9,066.25 10,426.75
4.80 The Commission directs MSLDC to undertake a review of the project execution
capabilities and the processes adopted so as to ensure timely implementation of
schemes and within the approved budgets. Accordingly, it is also important for
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 33 of 56
MSLDC to plan the scheme in advance, initiate process for approval so as to ensure
that the work can be initiated on time after getting necessary approval. It has been
observed that the internal approval processes of MSLDC and MSETCL itself are time-
consuming leading to delays in implementation of projects and schemes. Further, as
apparent from the submissions of MSLDC, while the physical work relating to the
schemes gets completed, the financial closure of the schemes is delayed substantially
leading to MSLDC not being in a position to claim costs and return on equity towards
the same through the Annual Budget. This not only leads to escalation of capital cost
on account of increasing IDC but also deprives MSLDC of return on equity invested.
Accordingly, MSLDC is directed to revisit the processes adopted within the
organisation and come out with an effective way to manage approvals from MSETCL
within reasonable timeframe and achieve complete closure of the schemes within
reasonable time from completion of the physical work.
Depreciation
4.81 Details of depreciation expenses actually incurred in FY 2012-13, revised estimates for
FY 2013-14 and projection for FY 2014-15, as submitted by MSLDC, are shown in the
following table:
Table 4-16: Depreciation submitted by MSLDC
(Rs. Lakh)
FY 2014-15
MERC Order
Provisional
True-up (Case
No. 133 of 2012)
Actual
MSLDC
Petition
(Case No.
133 of 2012)
MERC
Order (Case
No. 133 of
2012)
MSLDC
(Revised
Estimate)
MSLDC
Petition
Depreciation 222.48 99.65 438.10 425.98 370.41 474.03
Particulars
FY 2012-13 FY 2013-14
4.82 MSLDC submitted that during FY 2012-13, depreciation of Rs. 99.65 lakh has been
considered based on applicable rates of depreciation for different class of assets.
4.83 For the purpose of final Truing-up for FY 2012-13, the Commission has considered
depreciation expense of Rs. 99.60 lakh. The depreciation of Rs. 0.05 lakh considered
by MSLDC under the head vehicles for Kalwa has been disallowed as the assets have
already been depreciated up to 90% of the original cost of assets.
4.84 For FY 2013-14, MSLDC has estimated the depreciation expenses as Rs. 370.41 lakh
for opening GFA of Rs. 6547.10 lakh, as per applicable rate of depreciation for
different class of assets. For provisional Truing-up, the Commission has estimated
depreciation of Rs. 369.85 lakh based on average GFA arrived at on the basis of
opening and closing GFA and applicable rates for various asset classes.
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 34 of 56
4.85 For FY 2014-15, MSLDC has estimated the depreciation expenses as Rs. 474.03 lakh
for opening GFA of Rs. 9594.75 lakh, as per applicable rate of depreciation for
different class of assets. The Commission has calculated depreciation of Rs. 461.20
lakh based on average GFA arrived at on the basis of the revised opening and closing
GFA and applicable rates for various asset classes.
4.86 The Commission approves the depreciation for FY 2012-13 to FY 2014-15 as shown in
table below:
Table 4-17: Approved Depreciation
(Rs. Lakh)
MSLDC
(Actual)
Allowed
after
Truing-up
MSLDC
(Revised
Estimate)
ApprovedMSLDC
(Petition) Approved
Depreciation 99.65 99.60 370.41 369.85 474.03 461.20
Particulars
FY 2012-13 FY 2013-14
Final Truing-up Provisional Truing-up Budget
FY 2014-15
Interest on long term loan capital
4.87 The interest expenses actually incurred in FY 2012-13, revised estimates for FY 2013-
14 and projections for FY 2014-15, as submitted by MSLDC, are shown in the
following table:
Table 4-18: Interest on long term loan capital as submitted by MSLDC
(Rs. Lakh)
FY 2014-15
MERC Order
Provisional
True-up (Case
No. 133 of 2012)
Actual
MSLDC
Petition
(Case No.
133 of 2012)
MERC
Order (Case
No. 133 of
2012)
MSLDC
(Revised
Estimate)
MSLDC
Petition
Interest on Long Term
Loan Capital144.01 80.27 336.26 297.27 273.70 441.69
Particulars
FY 2012-13 FY 2013-14
4.88 MSLDC submitted that interest expense corresponding to new loans for new capitalised
schemes has been computed in accordance with the guidelines specified by the
Commission in its Order dated 16 May, 2006 in Case No. 30 of 2005, under paragraph
29, which had considered interest expense based on normative debt-equity ratio of
70:30 in line with MERC (Multi Year Tariff) Regulations, 2011. The same has been
considered to calculate the loan amount for FY 2014-15.
4.89 MSLDC has considered interest rate of 12% for computation of the interest cost in FY
2012-13 & FY 2013-14. The Commission had sought the details of the computation for
the weighted average interest from MSLDC. However, MSLDC has not submitted the
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 35 of 56
detailed calculation of the weighted average rate of loan portfolio stating that it has not
received the necessary documentary evidence for the calculation of weighted average
rate of loan portfolio from MSETCL. However, MSETCL clarified that all the loans
pertaining to MSLDC projects have been availed from the Bank of Maharashtra whose
applicable rate of interest is 11.75%.
4.90 The Commission is not satisfied with the response submitted by MSLDC and observed
that this is due to lack of co-ordination between MSETCL and MSLDC. The
Commission considered this kind of response as non-adherence to the requirements
specified by the Commission and will consider this adversely while approving the
Budget submitted by the MSLDC going forward. In view of the same, the Commission
is constrained to approve interest on loans at 11.75%.
4.91 The Commission had sought details from MSLDC regarding the loans based on which
the interest cost has been allocated to MSLDC by MSETCL. In response to the query,
MSLDC submitted the following details:
Table 4-19: Details of existing loans allocated to MSLDC by MSETCL
(Rs. Lakh)
FY 2012-13 FY 2013-14 FY 2014-15
Sr. No. Particulars Proposed Proposed Proposed
Loan No. 21603009
1 Opening Loan 130.47 107.78 85.09
2 Addition During the Year - - -
3 Repayment during the Year 22.69 22.69 22.69
4 Closing Loan 107.78 85.09 62.40
5 Interest Rate 12.25% 12.25% 12.25%
6 Interest on Loan allocated by MSETCL 14.04 12.47 12.16
4.92 In addition to the above, MSLDC has considered Rs. 0.80 lakh as interest for existing
normative loans approved by the Commission for FY 2011-12. The same amount has
been considered for all the three years i.e. FY 2012-13 to FY 2014-15.
4.93 The Commission has considered the above details for the purpose of approving interest
on existing loans for the FY 2012-13 to FY 2014-15. Necessary adjustments have been
done for computing the interest allowed on normative loans approved for FY 2011-12
by considering repayment based on a ten year tenure approved by the Commission.
4.94 Based on the above, interest on existing loans for MSLDC has been considered as Rs.
14.81 lakh for FY 2012-13.
4.95 For the purpose of the final Truing-up exercise for FY 2012-13, the Commission has
considered a capitalisation of Rs. 1557.73 lakh and interest expense corresponding to
the normative debt-equity ratio of 70:30 basis has been computed at Rs. 65.42 lakh, in
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 36 of 56
addition to the interest expense of Rs. 14.81 lakh allocated by MSETCL towards
existing loans and interest calculated on normative loan of FY 2011-12. The
Commission has considered loan repayment factor assuming 10 year tenure for new
additional loans. The rate of interest considered for the new loans is 11.75% in
accordance to the discussion under clause 4.89 and 4.90 of this Order. Accordingly, the
Commission has approved Rs. 78.87 lakh as interest on long-term loans for FY 2012-
13.
4.96 For FY 2013-14, MSLDC has considered the interest on existing loans as Rs. 145.70
lakh. MSLDC has calculated interest expense on new loans considering the
Capitalisation of Rs. 2375.73 lakh. For calculation of interest, normative debt of 70%
of the Capitalisation and an interest rate of 12.00% has been considered by MSLDC.
Further, MSLDC has considered uniform spending of capital expenditure throughout
the year; hence the interest cost on the new loans has been estimated as Rs. 128.00
lakh. Total interest on loan proposed by MSLDC is Rs. 273.70 lakh.
4.97 Based on the details submitted by MSLDC on interest allocation from MSETCL,
interest liability of MSLDC for FY 2013-14 will be Rs. 13.16 lakh. This interest
amount also includes interest on new loans approved in FY 2011-12. The interest in
normative loan approved for FY 2012-13 has been considered as Rs. 121.72 lakh. The
Commission has approved capitalisation of Rs. 2519.15 lakh in FY 2013-14.
Considering 70% of capitalisation approved as the loan component and an interest rate
of 11.75%, the interest liability of FY 2013-14 will be Rs. 103.60 lakh. Accordingly,
the Commission approves interest on long term loan capital of Rs. 238.48 lakh for FY
2013-14.
4.98 For FY 2014-15, MSLDC has considered capitalisation of Rs. 952.00 lakh and
computed Rs. 441.69 lakh as interest on long-term loans.
4.99 The Commission has considered capitalisation of Rs. 1360.50 lakh and approved Rs.
374.46 lakh as interest on long-term loans comprising interest on new loans approved
for FY 2014-15 at Rs. 55.95 lakh, Rs. 196.84 lakh on loans approved for FY 2013-14,
Rs. 108.90 on loans approved for FY 2012-13 and interest cost apportionment of Rs
12.77 lakh from MSETCL towards existing loans.
4.100 Interest on long term loan capital approved by the Commission for FY 2012-13 to FY
2014-15 is shown in the table below:
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 37 of 56
Table 4-20: Approved Interest on long term loan capital
(Rs. Lakh)
MSLDC
(Actual)
Allowed
after
Truing-up
MSLDC
(Revised
Estimate)
ApprovedMSLDC
(Petition) Approved
Interest on Long Term
Loan Capital80.27 78.87 273.70 238.48 441.69 374.46
Final Truing-up Provisional Truing-up Budget
Particulars
FY 2012-13 FY 2013-14 FY 2014-15
Return on Equity (RoE)
4.101 The return on equity for FY 2012-13, revised estimates for FY 2013-14 and projection
for FY 2014-15, as submitted by MSLDC, are shown in the following table:
Table 4-21: Return on Equity submitted by MSLDC
(Rs. Lakh)
FY 2014-15
MERC Order
Provisional
True-up (Case
No. 133 of 2012)
Actual
MSLDC
Petition
(Case No.
133 of 2012)
MERC
Order (Case
No. 133 of
2012)
MSLDC
(Revised
Estimate)
MSLDC
Petition
Return on Equity 88.02 50.14 211.47 200.08 162.59 255.58
Particulars
FY 2012-13 FY 2013-14
4.102 MSLDC has estimated RoE for FY 2012-13 as Rs. 50.14 lakh. For the purpose of
Truing-up exercise, the Commission, in line with the principles outlined under its Order
dated 16 May, 2006 in Case No. 30 of 2005, has considered the equity component of
Rs. 467.32 lakh which is at 30% of the asset addition during the year and computed
RoE at the rate of 14%, which amounts to Rs. 32.71 lakh. In addition, the Commission
has also considered a return of 14% on opening equity of Rs. 124.49 lakh, which
amounts to Rs. 8.71 lakh for FY 2012-13. Accordingly, the total amount approved by
the Commission is Rs. 50.14 lakh.
4.103 For FY 2013-14, MSLDC has projected RoE of 15.5% on the equity contribution of
30% of assets capitalised during the year. MSLDC submitted its estimate of total RoE
at Rs. 162.59 lakh for FY 2013-14.
4.104 For the purpose of approval for FY 2013-14, the Commission has considered 15.5%
RoE on the opening equity as well as on 50% of the equity contribution of Rs. 755.75
lakh which is 30% of the asset addition during the year which totals to Rs. 150.30 lakh.
4.105 MSLDC submitted that the equity contribution for FY 2014-15 is Rs. 285.60 lakh (i.e.,
30% of the total capital outlay of Rs. 952.00 lakh) and RoE at 15.5% on opening equity
and 50% of addition of equity component amounts to Rs. 255.58 lakh.
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 38 of 56
4.106 The Commission has considered equity addition of Rs. 408.15 lakh during the year FY
2014-15 and approved RoE as Rs. 240.50 lakh for FY 2014-15, as shown in the table
below:
Table 4-22: Approved Return on Equity
(Rs. Lakh)
MSLDC
(Actual)
Allowed
after
Truing-up
MSLDC
(Revised
Estimate)
ApprovedMSLDC
(Petition) Approved
Return on Equity 50.14 50.14 162.59 150.30 255.58 240.50
Particulars
FY 2012-13 FY 2013-14 FY 2014-15
Final Truing-up Provisional Truing-up Budget
Part - C: Final True-up for FY 2012-13
4.107 Final True-up of expenses for FY 2012-13 is summarized in the following table:
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 39 of 56
Table 4-23: Final True-up for FY 2012-13
(Rs. Lakh)
APR Order
Provisional
true-up (Case
No. 133 of
2012)
Actuals -
MSLDC
Petition
Approved
after final
Truing-up
Deviation
from
Provisional
True-up
a b c d = c-a
A Operating Cost Budget
1 Operating & Maintenance Expenses
1.1 Employee Expenses 982.98 1,050.13 1,050.13 67.15
1.2 Administration & General Expenses 345.17 362.96 362.96 17.79
1.3 Repair & Maintenance Expenses 104.21 66.34 66.34 (37.87)
2 Interest on Working Capital 63.54 64.99 65.01 1.47
3 RLDC Fees and WRPC charges 596.21 596.21 596.21 -
Sub-total (Operating Cost Budget) 2,092.11 2,140.63 2,140.65 48.54
B Capital Cost Budget
4 Depreciation 222.48 99.65 99.60 (122.88)
5 Interest on Long Term Loan Capital 144.01 80.27 78.87 (65.14)
6 Return on Equity 88.02 50.14 50.14 (37.88)
Sub-total (Capital Cost Budget) 454.52 230.06 228.61 (225.90)
C Total SLDC Budget (A + B) 2,546.63 2,370.69 2,369.26 (177.36)
D SLDC Revenue Components
7 Income from Annual SLDC Fees 313.36 313.36 313.36 -
8Income from Monthly SLDC operating
charges1,111.32 1,111.32 1,111.32 -
9 SLDC Fees 253.44 306.07 306.07 52.63
10 Rescheduling Charges 174.39 175.17 175.17 0.78
11 Other Receipts 3.70 7.70 7.70 4.00
Total Revenue 1,856.21 1,913.62 1,913.62 57.41
E Revenue Gap / (Surplus) (C - D) 690.42 457.07 455.64 (234.77)
Sr.
No.Particulars
FY 2012-13
4.108 Accordingly, excess recovery of Rs. 234.77 lakh for FY 2012-13 is required to be
considered while approving MSLDC budget for FY 2014-15.
Part - D: Provisional True-up for FY 2013-14
4.109 Provisional True-up of expenses for FY 2013-14 is summarized in the following table:
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 40 of 56
Table 4-24: Provisional True-up for FY 2013-14
(Rs. Lakh)
APR Order
(Case No.
133 of 2012)
Revised
Estimates -
MSLDC
Petition
Approved
after
provisional
Truing-up
Deviation
from
Provisional
True-up
a b c d = c-a
A Operating Cost Budget
1 Operating & Maintenance Expenses
1.1 Employee Expenses# 1,324.35 1,172.50 1,170.10 (154.25)
1.2 Administration & General Expenses 374.44 441.73 453.07 78.63
1.3 Repair & Maintenance Expenses 110.97 166.61 164.25 53.28
2 Interest on Working Capital 79.02 78.57 75.79 (3.23)
3 RLDC Fees and WRPC charges 596.35 602.93 602.93 6.58
Sub-total (Operating Cost Budget) 2,485.14 2,462.34 2,466.13 (19.00)
B Capital Cost Budget
4 Depreciation 425.98 370.41 369.85 (56.13)
5 Interest on Long Term Loan Capital 297.27 273.70 238.48 (58.79)
6 Return on Equity 200.08 162.59 150.30 (49.78)
Sub-total (Capital Cost Budget) 923.34 806.70 758.63 (164.70)
C Total SLDC Budget (A + B) 3,408.47 3,269.03 3,224.76 (183.70)
D SLDC Revenue Components
7 Income from Annual SLDC Fees 694.34 694.34 694.34 -
8Income from Monthly SLDC operating
charges1,868.80 1,868.80 1,868.80 -
9 SLDC Fees - 326.25 326.25 326.25
10 Rescheduling Charges - 74.11 74.11 74.11
11 Other Receipts - 8.89 8.89 8.89
Total Revenue 2,563.15 2,972.39 2,972.39 409.25
E Revenue Gap / (Surplus) (C - D) 845.32 296.64 252.37 (592.95)
Sr.
No.Particulars
FY 2013-14
# Revised Employee expenditure submitted by MSLDC in response to data gaps Set 3 has been considered
under the column “Revised estimates – MSLDC Petition”
4.110 Accordingly, excess recovery of Rs. 592.95 lakh for FY 2013-14 is required to be
considered while approving the budget for FY 2014-15.
4.111 MSLDC, vide their prayer clause (c) and (d) have requested the Commission to allow it
to retain the additional revenue earned through scheduling fees, rescheduling fees,
registration fees and processing fees as surplus and reserves of MSLDC, which would
help in providing the margin money for further Capex as recommended by the Task
Force set up by MoP. It also prayed to be allowed to retain charges as approved in
MSLDC budget Petition Order in Case No. 133 of 2012. The Commission had already
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 41 of 56
dealt with this issue in the previous Order in Case No. 181 of 2011 dated 30 March,
2012 and the relevant paragraph of the Order is reproduced below for reference.
“58. MSLDC vide their prayer clause (c) and (d) have requested the Commission
to allow it to retain the additional revenue earned through scheduling fees,
rescheduling fees, registration fees, and processing fees as surplus and reserves of
MSLDC, which would help in providing the margin money for further Capex as
recommended by the Task Force set up by MoP and also retain the charges as
approved in MSLDC Budget Petition Order in Case No. 94 of 2010. However, the
Commission notes that funding requirement to fund capex through debt and equity
has already been addressed as part of capital charge related budget provisions.
Further, all associated cost of operations towards scheduling and open access
related activities have been covered as part of various operating cost budget
components. The Commission does not adjust this additional revenue while
approving revenue projections and the same is adjusted only once it is actually
earned. Under these circumstances, the Commission is of the view that revenue
from such activities should be used to adjust the SLDC fees and charges to be
recovered from long-term users. In case of any specific funding requirement for
any specific project, MSLDC may submit separate application, which can be
considered on the merits of such case.”
4.112 In response to the query pertaining to capability of MSLDC to undertake financial
management independently raised by the Commission during the Public Hearing held
on 25 February, 2014, MSLDC vide its addendum submitted on 4 March, 2014 has
submitted that for ensuring financial independence, the revenues of MSLDC will be
maintained in a separate bank account and this account will be independently operated
by MSLDC. The operating expenditure will also flow through this separate account and
MSLDC will ensure adequate working capital management. For capital expenditure,
MSLDC will open separate bank accounts to ensure proper segregation of capital and
revenue expenditure and ensuring proper end use of funds. MSLDC has also submitted
that it is in position to carry out efficient fund management.
4.113 The Commission has noted the submission made by MSLDC. The Commission feels
that the plan submitted by MSLDC needs to be complemented by availability of the
necessary trained manpower to ensure effective implementation. The Commission feels
that MSLDC should implement the proposed plan and should update the Commission
regarding the progress during the next budget filing. The Commission based on the
status of implementation will take appropriate decision with regards to allowing
MSLDC to retain the additional revenue earned through scheduling fees, rescheduling
fees, registration fees and processing fees as surplus and reserves of MSLDC. For the
present Order, the Commission continues to have the same stand in the matter.
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 42 of 56
Part - E: Summary of Revenue Budget for FY 2014-15
4.114 Accordingly, MSLDC Budget for FY 2014-15 as approved by the Commission is
summarized in the following Table:
Table 4-25: Revenue Budget for FY 2014-15
(Rs. Lakh)
Projections -
MSLDC
Petition
Approved
by
Commission
A Operating Cost Budget
1 Operating & Maintenance Expenses
1.1 Employee Expenses# 1,573.93 1,594.14
1.2 Administration & General Expenses# 513.84 548.15
1.3 Repair & Maintenance Expenses 210.00 175.86
2 Interest on Working Capital# 97.28 95.72
3 RLDC Fees and WRPC charges 602.93 602.93
Sub-total (Operating Cost Budget) 2,997.98 3,016.80
B Capital Cost Budget
4 Depreciation 474.03 461.20
5 Interest on Long Term Loan Capital 441.69 374.46
6 Return on Equity 255.58 240.50
Sub-total (Capital Cost Budget) 1,171.30 1,076.17
CTotal SLDC Budget for FY 2014-15 (A +
B)4,169.28 4,092.97
True-up Adjustment on account of Over-
recovery/ Under-recovery
7Add: Revenue gap/ (surplus) of FY 2012-13
after final truing-up(233.35) (234.77)
8Add: Revenue gap/ (surplus) of FY 2013-14
after provisional truing-up(548.68) (592.95)
DSub-total (7 + 8) (True-up adjustment for FY
2012-13 and FY 2013-14)(782.02) (827.72)
E
Total Revenue to be recovered through
SLDC Fees & Charges for FY 2014-15
(C - D)
3,387.26 3,265.25
Sr.
No.Particulars
FY 2014-15
# Revised Employee expenditure, Administration & General Expenses and Interest on
Working Capital as submitted by MSLDC vide addendum dated 4 March, 2014
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 43 of 56
5 Determination of SLDC Fees and Charges and Mechanism for
Recovery
5.1 Based on the above discussion, the Commission approves the MSLDC Budget for FY
2014-15 as Rs. 4092.97 lakh. However, due to True-up adjustment to the extent of Rs.
827.72 lakh, the approved revenue from SLDC fees and charges for FY 2014-15 shall
be Rs. 3265.25 lakh. Further, the total True-up adjustment of Rs. 827.72 lakh has been
adjusted in proportion to Operating Cost Budget and Capital Charge Budget to
determine annual SLDC operating charges and annual SLDC fees for FY 2014-15. The
approved revenue from operating charges corresponding to Operating Cost Budget and
SLDC fees corresponding to Capital Charge Budget for FY 2014-15 is presented in the
following table:
Table 5-1: Approved MSLDC Budget for FY 2014-15
(Rs. Lakh)
Approved
SLDC
Budget
True-up
Adjustment
Approved
Revenue
1 Operating Cost Budget 3,016.80 (610.08) 2,406.72
2 Capital Charge Budget 1,076.17 (217.63) 858.54
3 Total SLDC Budget 4,092.97 (827.72) 3,265.25
FY 2014-15
Sr.
No.Particulars
5.2 The Commission, in its earlier Order dated 16 May, 2006 in Case No. 30 of 2005 has
outlined the principles for determination of SLDC fees and charges and mechanism for
recovery of the same, which has been adopted for FY 2014-15, as outlined below.
SLDC Fees and Charges:
5.3 SLDC Fees and Charges shall comprise of following components:
(a) Annual SLDC Fees – corresponding to Capital Charge related budget
components, payable on semi-annual basis.
(b) SLDC Operating Charges – corresponding to annual Operating Cost Budget
comprising of employee expense, R&M expense, A&G expense, interest on
working capital and RLDC fees and charges, payable monthly in arrears.
5.4 Based on the principles outlined in the Order dated 16 May, 2006 in Case No. 30 of
2005, the annual SLDC fees and annual SLDC operating charges were levied on
distribution Licensees in proportion to their contribution to Co-incident Peak Demand
(CPD) in MW terms met during the previous year. However, the Commission in its
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 44 of 56
Order dated 31 March, 2011 in Case No. 90 of 2010 modified the methodology for
sharing the fees and charges. The relevant extract of the Order reads as under:
“61. …
…However, in accordance with the MERC (Multi Year Tariff) Regulations, 2011,
which is applicable for determination of tariff from FY 2011-12, the mechanism of
sharing of Transmission charges has now been modified such that the sharing
would be done on the basis of proportion of Distribution Licensee’s contribution
to average of CPD and Non-coincident Peak Demand (NCPD).” (Emphasis
added) “
In view of the above, for FY 2014-15, the Commission is adopting a similar
methodology for sharing SLDC fees and charges, wherein the same shall be shared
among distribution Licensees in proportion to their contribution to average of CPD and
NCPD.
Annual fees shall be recovered on a semi-annual basis on 10 April and 10 October of
each financial year, whereas the operating charges shall be recovered on a monthly
basis, at the end of the month.
5.5 Further, SLDC in its Petition has proposed to revise the registration/connection fees,
scheduling charges, rescheduling charges and the short term open access charges which
were approved by the Commission in its previous Order (Order No. 133 of 2012).
MSLDC has submitted that in view of higher charges levied by other SLDC, the rates
approved by the Commission for the aforesaid mentioned charges should be revised.
The proposal submitted by MSLDC is reproduced below:
Table 5-2: Revision in Charges proposed by MSLDC
Sr. No. Particulars Existing Charges (Rs.) Proposed Charges (Rs.)
1 Registration Charges 10000 per connection 20000 per connection
2 Scheduling Charges 1000 per day 3000 per day
3 Rescheduling Charges 3000 per revision 3000 per revision
4 Short Term Open Access (STOA)
Application fee 5000 per application 10000 per application
5.6 The Commission is of the view that since the registration/connection fees and
rescheduling charges currently prevailing are fixed prior to the year 2005, it merits
revision to reflect actual MSLDC costs. Further, it is also important to note that these
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 45 of 56
charges are transactional charges and hence revenue from these charges cannot be
predicted and would depend on the transactions taking place during the year.
5.7 The Commission observes that the various SLDC fees and charges such as
registration/connection fees, scheduling charges, re-scheduling charges and STOA
processing fees in Maharashtra are generally aligned with the fees and charges with
other States though the charges are higher in certain states. The charges will also have
to be looked at from the perspective of the increasing quantum of these transactions in
the State and the load on the MSLDC on account of this. Accordingly, considering the
same and also the fact that these charges were fixed prior to the year 2005, there is a
case to consider revision of these rates to reflect the present costs incurred by MSLDC.
5.8 The Commission revises the Registration/Connection fees and rescheduling charges as
given above and the MSLDC shall be entitled to levy and recover
registration/connection fee and rescheduling charges w.e.f. 1 April, 2014 as under:
o Registration / connection fees at the rate of Rs 20,000/- per connection for
connecting to the Intra-state transmission system (InSTS). The registration fees
shall be a one-time fee payable at the time of registration or seeking connection to
the InSTS. This will be applicable for all generating companies, distribution
Licensees and transmission Open Access users.
o Rescheduling Charges: To be levied on generating companies, distribution
Licensees, trading companies, transmission OA users, as the case may be, at the
rate of Rs 3000/- for each revision in schedule after the finalization of schedules by
MSLDC on a day-ahead basis or for non-submission of schedule as per State Grid
Code requirements.
5.9 In addition, MSLDC has proposed to retain other charges as approved in an earlier
Order (Case No. 117 of 2008) dated 29 April, 2009, and the same shall be recoverable
at revised rates approved by the Commission. The details of the same are as given
below:
Scheduling Charges: MSLDC has proposed Scheduling Charges of Rs. 3000/- per
day for Intra-State Short Term Open Access transactions. In this context, MSLDC
is required to undertake ‘scheduling’ process on day-ahead basis in accordance
with State Grid Code Regulations, co-ordinate with RLDC and facilitate Open
Access transactions. Hence, the Commission hereby approves the Scheduling
Charges for Short Term Open Access transactions at Rs 3000/- per day, as
proposed by MSLDC. The revenue from such Scheduling Charges shall be
considered for adjustment of SLDC budget in subsequent years.
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 46 of 56
o Short Term Open Access Application Processing Fees: MSLDC has proposed to
levy non-refundable application processing fee of Rs 10,000/- per application in
case of Short Term Open Access applications. MSLDC, as Nodal Agency for
short-term Transmission Open Access (STOA) transactions, will have to facilitate
and process Short-Term Open Access applications in accordance with the
procedures formulated for the purposes. The volume of Open Access transactions
and applications thereof is expected to increase. In this regard, the Commission has
approved non-refundable application processing fees of Rs 7,500/- per application
in case of Short-Term Open Access transactions.
o Delayed Payment Charges: The delayed payment charges as approved by the
Commission in its Order (Case No. 117 of 2008) at the rate of SBI PLR plus 4%
per annum have been retained by the Commission at the same level. These charges
shall be applicable in case of delay in payment beyond due date in respect of SLDC
fees and charges approved under this Order. The Commission recognises that
timely payment of SLDC fees and charges would be critical and has accordingly
approved the delayed payment charges.
5.10 Thus, the charges approved by the Commission for FY 2014-15 are as given below:
Table 5-3: SLDC fees and charges approved by the Commission
Particulars Existing charges
(Rs.)
MSLDC Proposal
(Rs.)
Charges approved by
Commission
(Rs.)
Registration /
connection charges
10000
(per application)
20000
(per application)
20000
(per application)
Scheduling charges
Rs.
1000
(per day)
3000
(per day)
3000
(per day)
Re-scheduling charges 3000
(per revision)
3000
(per revision)
3000
(per revision)
STOA Application
Processing Fees
5000
(per application)
10000
(per application)
7500
(per application)
5.11 The net MSLDC budget for FY 2014-15, after Truing-up adjustments for FY 2012-13
and FY 2013-14, has been approved as Rs. 3265.25 lakh, comprising net approved
Operating Cost Budget of Rs. 2406.72 lakh and net approved Capital Charge Budget of
Rs. 858.54 lakh.
5.12 MSLDC will have to recover charges from the distribution Licensees based on the
share of average of Co-Incident Peak Demand (CPD) and Non-Co-Incident Peak
Demand (NCPD) met by individual distribution licensee for the period October 2012 to
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 47 of 56
September 2013. The 12-monthly average of CPD and NCPD from October 2012 to
September 2013 and the share of each distribution licensee in terms of contribution to
average of CPD and NCPD (MW) are summarized in the following table.
5.13 Accordingly, the Commission hereby approves recovery of Monthly SLDC Operating
Charges and Semi-annual SLDC Fees during FY 2014-15 from various distribution
Licensees as summarized below:
Table 5-4: Determination of share of each distribution Licensee out of approved MSLDC
Budget for FY 2014-15
(Rs. Lakh)
Particular
Net
MSLDC
Budget
for FY
2014-15
Net Annual
Operating
Budget
Net
Capital
Charge
Budget
Share of
Average
CPD and
NCPD
Percentage
Share
Annual
MSLDC
Operating
Charges
Annual
MSLDC
Fees
Annual
MSLDC
Fees and
Charges
MSEDCL 13155 81.72% 1,966.87 701.63 2,668.50
TPC - D 1135 7.05% 169.66 60.52 230.18
Rinfra - D 1006 6.25% 150.36 53.64 204.00
BEST 801 4.98% 119.83 42.75 162.57
Total 16097 100.00% 2,406.72 858.54 3,265.25
3,265.25 2,406.72 858.54
5.14 The monthly and semi-annual fees and charges payable by the licensees is given below:
Table 5-5: Approved recovery of SLDC Fees & Charges
Particular
Monthly Operating
charges
( Rs. Lakh/ month)
Semi-Annual MSLDC
Fees
(Rs. Lakh/ Half Year)
MSEDCL 163.91 350.82
TPC - D 14.14 30.26
Rinfra - D 12.53 26.82
BEST 9.99 21.37
Total 200.56 429.27
5.15 As stated previously, with regard to MSLDC’s request to allow it to retain the amount
collected through other fees and charges for financial independence, the Commission
once again reiterates that permitting MSLDC to retain the money can be considered
subject to MSLDC satisfying the Commission as to the availability of the necessary
infrastructure and accounts/finance team to manage the retained money. The
Commission further stated that this capability would develop with MSETCL providing
financial independence to MSLDC to operate as an independent company.
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 48 of 56
5.16 The Commission also directs MSLDC to undertake capacity building of its staff in
Regulatory matters so as to enable them to undertake the annual budgeting exercise
with more rigour and seriousness that the process deserves. MSLDC shall submit the
steps taken by it towards the same within 3 months of issue of this Order.
5.17 The Commission will True-up actual expenses incurred subject to prudence check and
revenue earned during FY 2013-14 and FY 2014-15 after submission of audited
accounts and allocation statements by MSLDC.
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 49 of 56
6 Applicability of the Order and key directives
6.1 The Commission has through this present Order has approved the final True-up for the
FY 2012-13, the provisional True-up for FY 2013-14 and the Budget for the FY 2014-
15.
6.2 The approval has been done in line with the approach adopted by the Commission in
previous orders, applicable provisions of the MERC (Terms and Conditions of Tariff)
Regulations, 2005 for undertaking True-up for FY 2012-13 and applicable provisions
of the MERC (MYT) Regulations, 2011 for undertaking the provisional True-up of FY
2013-14 and Budget approval for FY 2014-15.
Summary of Findings:
True-up for FY 2012-13
6.3 For the purpose of Truing-up for FY 2012-13, the Commission has examined the
actual expenditure incurred by the MSLDC vis-à-vis the expenditure approved
during the provisional True-up. The reasons for variations in the cost elements as
submitted by MSLDC have been examined and accordingly, the approvals have
been given.
6.4 The actual expenditure incurred by MSLDC in FY 2012-13 has been approved by
the Commission in most of the cost components except for depreciation and
interest on long term loan capital. A small part of the depreciation has been
disallowed as MSLDC had claimed depreciation on asset which was already
depreciated up to 90% of its original cost. As regards the interest on long term
loan capital, the Commission has approved lower rate of interest at 11.75% as
against 12% weighted average interest rate proposed by MSLDC in absence of
necessary supporting data being made available by MSLDC and based on their
submission wherein it is submitted that loans for schemes pertaining to MSLDC
are from Bank of Maharashtra for which the rate of interest is 11.75%.
6.5 The Commission has approved the capitalisation of capital expenditure as claimed
by MSLDC for both the DPR schemes for which the in-principal approval was
obtained and for non-DPR schemes which formed a very small portion of the total
capitalisation.
6.6 Based on the above, the Commission has approved a revenue surplus of Rs. 234.77
lakh in FY 2012-13 to be adjusted in the budget for FY 2014-15.
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 50 of 56
Provisional True-up for FY 2013-14
6.7 MSLDC has submitted the revised estimates for FY 2013-14 based on actual
expenditure incurred for first six months of the year and estimation for the last six
months.
6.8 The Commission, in line with the approach adopted in previous Orders has
approved the employee expenses, A&G expenses and R&M expenses by escalating
them over the previous year approved expenses using CPI and WPI indices linked
escalation factors. However, certain elements like leave encashment, gratuity,
electricity charges, insurance, incentive, etc. have been approved as proposed by
MSLDC as these are expected to be higher on account of certain reasons identified
by MSLDC or are based on actual information available at the disposal for
MSLDC. The Commission has also accepted the revised submission of employee
expenses as submitted by MSLDC on account of changes in the amounts
considered against the performance and certification linked incentives.
6.9 The Commission has approved the employee expenditure for FY 2013-14 based on
the actual existing employee strength of 111 as against 141 employees considered
by MSLDC for the last 6 months of the financial year. This approach has been
adopted as it is unlikely that MSLDC will be able to fill up the vacancies during
the present financial year.
6.10 The Commission has approved the capitalisation as proposed by MSLDC for all
the DPR schemes proposed to be capitalised during the year except for a scheme
pertaining to Infrastructure Development for which the DPR is yet to be
submitted and wherein MSLDC also clarified that it had inadvertently considered
part capitalisation in the present year. This scheme has been considered for
capitalisation in the next year subject to submission of the DPR by MSLDC within
3 months from issue of this Order and getting necessary approvals from the
Commission. As regards the non-DPR schemes, Commission has not considered
capitalisation against two schemes as MSLDC had submitted that the tendering
process for these schemes is ongoing and hence, the Commission considered that it
is unlikely that these schemes will be completed during the current year. As
regards the scheme pertaining to enhancement of real time data acquisition
system, the Commission has considered capitalisation as proposed by MSLDC as
the work relating to the scheme has been completed and scheme closure is
expected within the financial year. For the scheme pertaining to Infrastructure
Development, the Commission has approved 50% of the capitalisation proposed
by MSLDC on account of lack of information pertaining to definitive progress of
implementation of the scheme.
6.11 Based on the above, the Commission has approved a revenue surplus of Rs. 592.95
lakh for the FY 2013-14 to be adjusted in the Budget for FY 2014-15.
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 51 of 56
Budget Order for FY 2014-15
6.12 MSLDC has projected the expenses for FY 2014-15 based on the sanctioned
employee strength, expected expenses based on past trends and capitalisation
expected during the year.
6.13 The Commission has approved the employee expenses based on the sanctioned
strength which has been determined based on the recommendations of the Gireesh
Pradhan Committee report. Further, the Commission has also accepted the
revised submission of MSLDC in the matter of expenses on account of revised
incentive scheme and also on account of higher training expenses as per the
proposed training program drawn by MSLDC. These expenses have been
approved as proposed by MSLDC and all the other expenses (employee, A&G and
R&M) have been approved by escalating the approved expenses for FY 2013-14
with CPI & WPI indices linked factors.
6.14 As regards approval of the capitalisation for FY 2014-15, the Commission has
approved the 50% of the capitalisation proposed for three new DPR schemes
considering the fact that the DPRs are yet to be submitted and also considering
the past track record of implementation and capitalisation of schemes. Further,
this approval is also subject to submission of the DPRs for these schemes within 3
months from the issue of this Order. In addition, one ongoing DPR scheme is
envisaged to be completely capitalised in the FY 2014-15. As far as the non-DPR
schemes are concerned, the Commission has approved capitalisation considering
that the opening CWIP for the schemes would be entirely capitalised and the 50%
of the investment proposed during the year would be capitalised.
6.15 Based on the above, the Commission has approved a budget of Rs. 4092.97 lakh
for FY 2014-15. After considering the adjustment of surplus for FY 2012-13 and
FY 2013-14, the net revenue to be recovered from the Licensees would be Rs.
3265.25 lakh.
6.16 The Commission has also outlined the mechanism for recovery of this cost in line
with the already set process and also approved the other fees and charges
recoverable by MSLDC from the beneficiaries of its services.
6.17 The Commission has also discussed the need for overall strengthening of the
Financial and Administrative capabilities of MSLDC along with the technical /
operational capabilities so as to ensure effective functioning of the MSLDC
leading the way to autonomous operations. Accordingly, the Commission has
given necessary directives to MSLDC in this regards along with other directives.
6.18 The key directives issued by the Commission in the present Order for compliance
by MSLDC have been summarised below:
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 52 of 56
(a) As a first step towards achieving financial and operational autonomy, the
Commission directed MSLDC to submit necessary proposal for ensuring
appropriate delegation of power to MSETCL for approval.
(b) The Commission directed MSLDC to take up the matter pertaining to
implementation of the incentive schemes for MSLDC employees in line with
the recommendations of the Gireesh Pradhan Committee with MSETCL
management so as to obtain necessary approvals for implementing the
scheme submitted as part of the addendum submitted on 4 March, 2014.
(c) The Commission expressed concern over the vacant posts in MSLDC and
directed MSLDC to come up with plan so as to ensure availability of
adequate staff to ensure optimal functioning of the MSLDC. The Commission
also directed MSLDC to provide information regarding the training and
certification planning, manpower recruitment plan, training programs for
new employees along with the related expenditure considered for these
elements in the budget Petition submitted by MSLDC through an addendum
to the Petition filed by MSLDC. The same has been submitted by MSLDC
vide addendum dated 4 March, 2014.
(d) The Commission directed the Petitioner ensure proper accounting of
expenses under appropriate account heads and also provide necessary details
along with the next Petition so as to enable the Commission to comprehend
the expenditure being incurred under various account head and accordingly
approve the same.
(e) The Commission directs MSLDC to submit DPR for schemes over Rs. 100
lakh outlay proposed in FY 2014-15 within 3 months from issue of this
Order. MSLDC is also required to submit the cost benefit analysis reports for
the non-DPR schemes for FY 2013-14 within 3 months from issue of this
Order.
(f) The Commission directs MSLDC to undertake a review of the project
execution capabilities and the processes adopted so as to ensure timely
implementation of schemes and within the approved budgets. MSLDC is
accordingly directed to revisit the processes adopted within the organisation
and come out with an effective way to manage approvals from MSETCL
within reasonable timeframe and achieve complete closure of the schemes
within reasonable time from completion of the physical work.
(g) The Commission also directs MSLDC to undertake capacity building of its
staff in Regulatory matters so as to enable them to undertake the annual
budgeting exercise with more rigour and seriousness that the process
deserves. MSLDC shall submit the steps taken by it towards the same within
3 months of issue of this Order.
(h) The Commission will True-up actual expenses incurred subject to prudence
check and revenue earned during FY 2013-14 and FY 2014-15 after
submission of audited accounts and allocation statements by MSLDC.
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 53 of 56
6.19 This Order shall come into force with effect from 1 April, 2014.
6.20 With the above, MSLDC’s Petition in Case No. 178 of 2013 stands disposed of.
Sd/- Sd/-
(Vijay L. Sonavane) (Chandra Iyengar)
Member Chairperson
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 54 of 56
Appendix I
List of persons who attended the Technical Validation Session on 9 January, 2014 at
1100 hrs.
Sr. No. Name Company / Institution
1. Shri A. K. Lade MSLDC
2. Shri J. R. Kulkarni MSLDC
3. Shri V. D. Pande MSLDC
4. Shri D. K. Rokade MSLDC
5. Ms. Swati Yambal MSLDC
6. Shri N. V. Kirolikar MSLDC
7. Shri J. D. Tayade MSLDC
8. Shri J. M. Bansod MSLDC
9. Shri A. P. Rewagad MSLDC
10. Shri P. M. Buradkar MSLDC
11. Ms. Sheela MSLDC
List of persons who attended the Public Hearing on 11 February, 2014 at 1130 hrs
Sr. No. Name Company / Institution
1. Shri Ashok Lade MSLDC
2. Shri Ashok Pendse Thane Belapur Industries Association
3. Shri Sanjay Kulkarni MSETCL
4. Shri J. R. Kulkarni MSLDC
5. Shri V. D. Pande MSLDC
6. Shri A. P. Rewagad MSLDC
7. Shri J. D. Tayade MSLDC
8. Shri D. K. Rokade MSLDC
9. Shri J. M. Bansode MSLDC
10. Ms Swati Yambal MSLDC
11. Ms Sheela Watte MSLDC
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 55 of 56
Sr. No. Name Company / Institution
12. Shri D. R. Wadate MSLDC
13. Shri B. N. Khasale MSETCL
14. Shri K. K. Kerawala DSK
15. Shri S. A. Bakre BEST
16. Shri Abhijit Dhamdhere IPPAI
17. Shri A. V. Kadam -
18. Shri S. B. Mali -
List of persons who attended the Public Hearing on 25 February, 2014 at 1100 hrs
Sr. No. Name Company / Institution
1. Shri Bipin Shrimali, IAS MSETCL
2. Shri Ashok Lade MSLDC
3. Shri Pratap Mohite MSETCL
4. Shri S. G. Kelkar MSETCL
5. Shri Sachin Palkar MSETCL
6. Shri Santosh Amberkar MSETCL
7. Shri S Prilok Kumar Deloitte
8. Shri Amitabh Saha Deloitte
9. Shri Amit Mittal ICRA
10. Shri V. D. Pande MSLDC
11. Shri Tej Singh MSETCL
12. Shri Rajesh Pawar MSETCL
13. Shri J. D. Tayade MSLDC
14. Shri D. R. Wadate MSLDC
15. Shri Rajeev Kulkarni Deloitte
16. Ms Swati Yambal MSLDC
17. Shri S. S. Kulkarni MSLDC
Approval of Annual Budget of MSLDC for FY 2014-15
Order - Case No. 178 of 2013 Page 56 of 56
Sr. No. Name Company / Institution
18. Shri D. K. Rokade MSLDC
19. Shri Abhijit Dhamdhere IPPAI