MERC imposes Rs 1 lakh penalty on MSEDCL

 

 

 

Maharashtra Energy Regulatory Commission (MERC) has imposed a penalty of Rs one lakh on Maharashtra State Electricity Distribution Company Limited (MSEDCL) for latter’s failure to comply with its directives. The Commission ruled that the Discom would pay penalty of Rs one lakh for each of the instance of non-compliance with set of directions that were issued during ruling on MTR order. The ruling came on a suo-motu proceedings MERC initiated as on March 31, 2023, wherein it had mentioned about taking up issues related to review of status of compliances while finalising MTR and truing up of accounts. The Commission had directed MSEDCL not to release new power connection without meters, sale of surplus power, formation of separate company for agricultural consumers, exploring various avenues on banking front, etc. The order further mentioned that MSEDCL has also failed to submit point wise reply to queries posed by Maharashtra Veej Grahak Sanghatana (MVGS) MTR hearing and hence the penalty.

 

The Commission’s order is damning indictment of poor internal financial controls at MSEDCL, as same have ultimate bearing on the outcome of power tariff. The full bench comprising Chairperson Sanjay Kumar, Anand Limaye and Surendra Biyani, both Members, delivered the scathing order on January 22, 2025, while disposing of the proceedings. While admitting MSEDCL MTR petition for final true-up of financial year 2019-20, FY 2020-21 and FY 2021-22 plus provisional true-up for FY 2022-23 and Revised Tariff & Projection for FY 2023-24 to FY 2024-25), MERC had set specific timelines for compliance. MERC had issued directives to MSEDCL, one about exploring options to sell surplus power and other one efficacy of power procurement in view of likely surplus availability. As to MVGS, it had challenged finalisation of true-up for FY 2019-20, FY 2020-21 and FY 2021-22 by the Commission inspite of serious deficiencies in the Auditor’s reports.

 

These deficiencies, MVGS said, have financial implications and contribute to raised power tariffs for the consumers. MSEDCL had failed to provide point wise replies to the objections even after a period of six months, leading to hauling up by the Commission. MVGS had flagged serious issues mentioned in the Auditor’s report, non maintenance of compulsory Cost Accounts under the provisions of Companies Act, 2013 and MERC MYT Regulations, 2019, erroneous procedures adopted towards the Opening Balances of Assets, etc. as same leads to higher depreciation expense and inadequate Internal audit systems. Further, it listed non-verification of fixed assets for many years (Total Assets amounting to more than Rs 80,000 crore), which may result in allowing higher depreciation expenses, etc. and failure of MSEDCL to safeguarding of the assets for preventing and detecting frauds and other irregularities among others. To buttress its point about Auditor’s report, MVGS cited similar reports from private Discoms that do not have any adverse remarks in comparison to MSEDCL.

 

In the lengthy order, MERC listed various points raised in Auditor’s report and pointed out that though MSEDCL provided some clarifications, the Discom however failed to submit action plan for corrective action on all the adverse remarks. The Discom was duty bound to counter each of the objections, specifically mentioned in auditor’s report. Similarly, the failure of MSEDCL to get clean chit from auditors about internal financial control till FY 2022-23 is a big failure till date, as same casts shadow on entire financial control. The Commission further rapped MSEDCL for not disclosing the damning disclaimer opinion report of auditors. It further observed that MSEDCL Directors and Officers are not interested in safeguarding the interest of MSEDCL owners (Government of Maharashtra) as they included income and expenses and other financial items that is not qualified for the same. This is also means the interest of stakeholders may get compromised owing to such acts.