According to reports from mainstream media, the power purchase deal made by the Kerala State Electricity Board (KSEB) during the summer, without necessary planning or permission from the Regulatory Commission, is placing a heavy fiscal burden on the state. The estimated loss is Rs 4 crore every day, expected to reach Rs 200 crore by the end of the contract, which will ultimately be passed on to consumers through electricity bills. The purchase of one crore units per day began on May 12 at a rate of Rs 9.60, resulting in a daily bill of Rs 10 crore. Despite heavy rainfall reducing power consumption, the state is obligated to continue purchasing power at this rate until June 30 as per the contractual agreement. Nearly 50 lakh units that the state used to acquire from central stations at rates of Rs 4 to 5 are now being surrendered without consumption, incurring a fixed cost whether consumed or not, thus contributing to the Rs 4 crore loss.
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It appears that KSEB did not have any plans to face the excess power consumption during summer. An average excess of 3 crore units per day was consumed due to the heat wave.
KSEB was thrown into a state of panic. At the same time, they did not want to regulate consumption. Therefore, KSEB entered into a contract to buy power from the spot market at the rate of Rs 9.60 per unit. However, reports suggest that the rate will increase to Rs 10 when the power reaches the state. Since the spot market price is high, power is usually purchased only when necessary. But, KSEB entered into a contract with validity until June 30. Therefore, they are bound to purchase until then.
Kerala typically experiences abundant rainfall in June. Still, such a warranty is extraordinary. Reports suggest that the contract was executed with the verbal nod of the Government. The regulatory Commission is expected to be informed prior to entering into power purchase contracts. If a purchase is done without permission, it should be communicated to the Commission later and get the permission. But, reports suggest that the Commission was not informed about this particular contract.
This heavy loss of Rs 200 cr is an additional burden on the power consumers as the Government struggles hard to pay salaries and pensions. Welfare Pensions for old people have been irregular for the last several months. The heavy summer rains hit the entire state, causing losses worth crores of rupees. The CPM-led Left Democratic Front regime, with CPM Polit Bureau member Pinarayi Vijayan as the Chief Minister, has been blaming the Union Government for all fiscal issues the state faces. However, Union Finance Minister Nirmala Sitaraman has proved with the support of facts and figures that it is due to the wrong fiscal policies and luxurious expenses of the state Government.
