Petition No. 57 of 2007
Date of hearing: 5.2.2008
Date of Order: 15.2.2008

1.      PSEB Engineers’ Association filed this petition under Section 142 of the Electricity Act 2003 (Act) alleging non-payment of cash subsidy by the Government of Punjab (GOP) to the Punjab State Electricity Board (PSEB) as per Tariff Order of September 17, 2007 passed by the Commission for the year 2007-08. The petition states that this Order required GOP to pay a total subsidy of Rs.2548.73 crores to PSEB during the financial year 2007-08. In an earlier order of September 13, 2007, the Commission had directed that payment of subsidy be effected in quarterly instalments at the beginning of each quarter. Claiming that there has been a default on the part of GOP in effecting payment of subsidy to PSEB on the above lines, the petition seeks intervention of the Commission in the issue of directions to the GOP for clearing arrears of subsidy due from it to PSEB and to compensate the PSEB for any loss of interest on account of delayed payment. In the event of GOP not making good the arrears of subsidy, the petition seeks recovery of full tariff in the case of subsidized categories.

2.     The petition was admitted on December 11, 2007 and notice ordered to be issued to GOP and PSEB for January 8, 2008. On that date neither GOP nor PSEB had filed their replies. They were further directed to do so by January 29, 2008 and the petition fixed for hearing on February 5, 2008. PSEB filed its reply on January 29, 2008 stating there in that as on January 1, 2008 subsidy to the extent of Rs.704.64 crores has been paid by GOP. No reply has been filed by the State Government.

3.     As per letter dated February 8, 2008 of the Chief Secretary to the Government of Punjab (copy of letter annexed to this order) in the matter of subsidy to all categories of consumers, GOP has released a further sum of Rs.390.54 crores against outstanding subsidy and allowed PSEB to retain an additional Rs.375 crores collected/to be collected by them as electricity duty on behalf of the Government upto March 31, 2008. The Finance Department of the State Govt. is further reported to be making arrangements to clear the maximum amount of balance subsidy by 31st March 2008.

4.     The Commission notes that no specific order has been brought on record allowing the PSEB to retain a sum of Rs.375 crores to be collected as electricity duty to be paid upto March 31, 2008. Even if it is assumed that this amount would become forthcoming to PSEB, the total subsidy that would have been paid by the GOP to PSEB would amount to Rs.1470 crores as against Rs.2548.73 crores of subsidy payable at the beginning of the fourth quarter of 2007-08. It is, thus, evident that even as per submissions in GOP’s letter referred to above, a clear default in the payment of subsidy has taken place in terms of the order passed by the Commission on September 13, 2007.

Section 65 of the Act provides that if the State Govt. requires the grant of subsidy in the tariff determined by the Commission under Section 62 to any class of consumers, the Government would in that eventuality pay in advance and in such manner as may be specified by the Commission the amount required to compensate the person effected by the grant of subsidy. In the event of subsidy not being paid in accordance with the above provisions of the Act, tariff as fixed by the Commission would become applicable. It is quite evident from the position brought out in para 4 above that GOP has undoubtedly defaulted in the payment of subsidy to PSEB. This is inspite of the fact that an explicit undertaking had been given by GOP assuring that payment of subsidy would be effected. In the event, the Act does not envisage subsidized tariff being continued in the State and accordingly the Commission directs the Board to charge from 1.3.2008 onwards the tariff as determined in the Tariff Order for the year 2007-08 without taking into account the subsidy as indicated for different categories of consumers. It is also evident that the failure/delay in payment of subsidy would affect the finances of PSEB in so far as it would in that case have to borrow money to keep its operations going and it would need to be compensated for the cost thereof and interest payable thereon. These aspects will be dealt with in detail in the subsequent Tariff Order of the Commission. The Commission also clarifies that recovery of full tariff from the subsidized categories need not be effected should GOP make good the arrears of subsidy, by 1st March 2008.

sd/-	Sd/-	sd/-
(Satpal Singh Pall)	(Baljit Bains)	(Jai Singh Gill)
Member	Member	Chairman



Chandigarh
Dated: February 15, 2008


Government of Punjab
Department of Power
(Energy Branch)


To
		The Chairman, Punjab State Electricity Regulatory Commission, SCO 220-221, Sector 34-A, Chandigarh. Memo No. 194 Dated Chandigarh, the 8, February 2008
Subject:		Subsidy to all categories of consumers for neutralizing the increase in tariff for the year 2007-08.
		Kindly refer to your letter No.6047-6048/PSERC/Tariff/T of 7th Dec. 2007 and the further correspondence resting with the subject cited.

2.0      It is brought to your notice that the State Government has released Rs.390.70 crore against the pending subsidy bills of PSEB it has allowed them to retain Rs.375 crore collected/to be collected by them as electricity duty on behalf of the government upto 31st March 2008. For the remaining amount of Rs.1361.66 crore, the State Finance Department is making necessary arrangements to clear the maximum amount by 31st March 2008. In all, PSEB has so far been provided about Rs.1470 crore as subsidy during the current financial year.

3.0      In the aforesaid background, it is requested that PSERC may issue necessary directions to PSEB under Section 65 of the Electricity Act, 2003 to neutralize the effect of enhanced tariff of all categories of consumers as the State Government has decided to compensate the PSEB in this regard.

Sd/-          
Chief Secretary, Punjab