Kerala State Electricity Board invokes pension scare

DECCAN CHRONICLE.
Published Feb 10, 2018, 1:30 am IST
Updated Feb 10, 2018, 1:30 am IST
To seek tariff hike as way forward to ward of possible crisis 20 years later.
Kerala State Electricity Board
 Kerala State Electricity Board

THIRUVANANTHAPURAM: The Kerala State Electricity Board (KSEB) Limited has invoked the KSRTC pension scare to prepare the ground for a power tariff hike. The public utility has stated that it did not have enough money to transfer to the ‘Master Trust’ that was formed to meet its pension liabilities.  It has sought more money in the form of a higher return on equity from the government. However, if the state has no money to spare, as is the case now, the only option left to mobilise additional revenue is to hike tariffs. Nonetheless, unlike KSRTC, KSEBL’s pension crisis is not immediate.

If at all it happens, it will come about only 20 years from now. As it stands, there is no default of KSEBL pensions. But the problem is, the ‘Master Trust’ is getting thinner with KSEBL unable to meet a part of its annual commitment to the Trust. The Master Trust was formed in 2014 to take over the accumulated unfunded pension liabilities as on October 31, 2013, which was Rs 12,419 crore.

 

This liability, which has to be cleared in 20 years, has to be shared by the state government and KSEB Limited. The state has to meet Rs 5,861 crore of the liability over a period of 10 years at nine per cent interest. KSEBL’s share of the burden will be Rs 8,144 crore, which will be met over a period of 20 years at 10 per cent interest. The state government has till now kept its side of the bargain, not KSEBL. (It is another matter that no funding arrangement has yet been made to take care of the pension liabilities of Rs 3,500 crore that has accumulated since October 2013.) 

“The Board now transfers money enough only to pay current pensions, but this will leave nothing in the hands of the Trust to invest in money-generating schemes,” a top KSEBL official said. It is the revenue that the Trust generates from its excess funds that will take care of KSEBL’s pension requirements in the future. KSEBL has already sought a higher return on equity from the government, higher than the 14 per cent the Electricity Regulatory Commission has approved.  (RoE is the amount of net income the government ploughs back into the KSEBL as a percentage of shareholders equity.) KSEBL has also questioned the ERC's stand that money for the Trust should not be mobilised through tariff hike.

...
Location: India, Kerala




ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT