Approval of Annual Budget of MSLDC for FY 2014-15€¦ · NLDC National Load Despatch Centre NPTI National Power Training Institute . Approval of Annual Budget of MSLDC for FY 2014-15

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:

mailto:[email protected]

http://www.mercindia.org.in/

http://www.merc.gov.in/

Approval of Annual Budget of MSLDC for FY 2014-15


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



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



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



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



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



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



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.



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



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.



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



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



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



(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



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



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:-



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



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



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



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



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


A&G

Expenses362.96 362.96 441.73 453.07 513.84 548.15

Particulars

FY 2012-13 FY 2013-14 FY 2014-15



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:



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



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




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



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


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



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



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


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



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.



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



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



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.



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:



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



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.



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


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



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



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:



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


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.



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


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:



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:



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



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)


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



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.



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



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


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



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



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



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.



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



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.



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.



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.



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.



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:



(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.



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



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


1. Shri Ashok Lade MSLDC

2. Shri Ashok Pendse Thane Belapur Industries Association

3. Shri Sanjay Kulkarni MSETCL

4. Shri J. R. Kulkarni MSLDC


6. Shri A. P. Rewagad MSLDC



9. Shri J. M. Bansode MSLDC

10. Ms Swati Yambal MSLDC

11. Ms Sheela Watte MSLDC




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


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


11. Shri Tej Singh MSETCL

12. Shri Rajesh Pawar MSETCL


14. Shri D. R. Wadate MSLDC

15. Shri Rajeev Kulkarni Deloitte

16. Ms Swati Yambal MSLDC

17. Shri S. S. Kulkarni MSLDC





19. Shri Abhijit Dhamdhere IPPAI

Documents

Approval of Annual Budget of MSLDC for FY 2014-15€¦ · NLDC National Load Despatch Centre NPTI National Power Training Institute . Approval of Annual Budget of MSLDC for FY 2014-15