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State of Maharashtra - Section

Section 34 in The Maharashtra Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2005

34. Calculation of annual fixed charges.

- 34.1 Return on Equity Return on equity capital shall be computed on the equity capital determined in accordance with Regulation 31 at the rate of 14 per cent per annum in Indian Rupee terms.
34.2Income-tax.
34.2.1Income-tax on the income of the Generating Business of the Generating Company shall be allowed for inclusion in the annual fixed charges:
Provided that any change in such income-tax liability on account of assessment under the Income-tax Act, 1961, as certified by the statutory auditors, shall be allowed to be adjusted each year in the annual fixed charges:Provided further that any change in such income-tax liability on account of change in income of the Generating Business of the Generating Company from the approved forecast shall be attributed to the same controllable or uncontrollable factors as have resulted in the change in income and shall be dealt with accordingly:Provided further that the generating station-wise profit before tax as estimated for a financial year in advance shall constitute the basis for the distribution of the corporate tax liability to all generating stations of a Generating Company:
34.2.2The benefits of any income-tax holiday, credit for unabsorbed losses or unabsorbed depreciation shall be taken into account in calculation of the income-tax liability of the generating station of the Generating Company:
Provided that where such benefits cannot be directly attributed to a generating station, they shall be allocated across the generating stations of a Generating Company in the proportion of the generating station-wise profit before tax.
34.3Interest on loan capital
34.3.1Interest on approved loan capital for existing generating stations calculated under Regulation 31.1 above shall be allowed, based on the approved interest rate and the repayment schedules of such loans:
34.3.2Interest on normative loan capital, calculated under Regulation 31.2, Regulation 31.3 and Regulation 31.4 above shall be allowed, based on the approved interest rate and the normative repayment schedule in accordance with Regulation 32 above:
34.3.3The provisions of the Statements of Accounting Standard (AS 16): Borrowing Costs of the Institute of Chartered Accountants of India shall apply, to the extent not inconsistent with the provisions of these Regulations, in determination of the interest on loan capital.
34.3.4The Commission shall allow taxes on interest, commitment charges, finance charges and any exchange rate difference arising from foreign currency borrowings, to the extent recognized as interest cost in the books of account of the Generating Company.
34.4Depreciation, including Advance Against Depreciation
34.4.1Depreciation
For the purpose of tariff, depreciation shall be computed in the following manner, namely:
(i)The value base for the purpose of depreciation shall be the original cost of the asset as approved by the Commission in accordance with Regulation 30;
(ii)Depreciation shall be calculated annually, based on straight line method at the rates provided in the Annexure - I to the Regulation:
Provided that the residual life of the asset shall be considered as 10 per cent and depreciation shall be allowed up to maximum of 90 per cent of the original cost of the asset:Provided further that land is not a depreciable asset and its cost shall be excluded from the original cost for the purpose of calculation of depreciation:Provided also that the provisions of the Statements of Accounting Standards (AS6):Depreciation Accounting of the Institute of Chartered Accountants of India shall apply to the extent not inconsistent with these Regulations.
34.4.2Advance Against Depreciation. - In addition to depreciation, the Generating Company shall be entitled to Advance Against Depreciation, calculated in the manner given in Regulation 32.3 above.
34.4.3The Generating Company shall be permitted to recover amortisation of intangible assets upto such level as may be approved by the Commission.
Explanation - for the purpose of this Regulation, the term "intangible assets" shall mean such pre-operative and promotional expenditure incurred in cash and shown as a debit in the capital account of the Generating Company as has fairly arisen in promoting the Generation Business and shall exclude any amount paid or otherwise accounted as goodwill.
34.5Interest on Working Capital
(a)In case of Coal based/oil-based/lignite-fired generating stations, working capital shall cover:
(i)Cost of coal or lignite for one and a half months for pit-head generating stations and two months for non-pit-head generating stations, corresponding to target availability;
(ii)Cost of oil for two months corresponding to target availability;
(iii)Cost of secondary fuel oil for two months corresponding to target availability;
(iv)Operation and Maintenance expenses for one month;
(v)Maintenance spares @ 1 per cent of the historical cost; and
(vi)Receivables for sale of electricity equivalent to two months of the sum of annual fixed charges and energy charges calculated on target availability; minus
(vii)Payables for fuel (including oil and secondary fuel oil) to the extent of one month of the cost of fuel calculated on target availability.
(b)In case of Gas Turbine/Combined Cycle generating stations, working capital shall cover:
(i)Fuel cost for one month corresponding to target availability duly taking into account the mode of operation of the generating station on gas fuel and/or liquid fuel;
(ii)Liquid fuel stock for fifteen (15) days corresponding to target availability;
(iii)Operation and maintenance expenses for one month;
(iv)Maintenance spares at 1 per cent of the historical cost; and
(v)Receivables for sale of electricity equivalent to two months of the sum of annual fixed charges and energy charges calculated on target availability, minus
(vi)Payables for fuel (including liquid fuel stock) to the extent of one month of the cost of fuel calculated on target availability.
(c)In case of hydro power generating stations, working capital shall cover:
(i)Operation and maintenance expenses for one month;
(ii)Maintenance spares at 1 per cent of the historical cost; and
(iii)Receivables for sale of electricity equivalent to two months of the annual fixed charges calculated on normative capacity index.
(d)In case of own generating stations, no amount shall be allowed towards receivables, to the extent of supply of power by the Generation Business to the Retail Supply Business, in the computation of working capital in accordance with these Regulations.
(e)Rate of interest on working capital shall be on normative basis and shall be equal to the short-term Prime Lending Rate of State Bank of India as on the date on which the application for determination of tariff is made.
34.6Operation and Maintenance Expenses
34.6.1Existing generating stations
(a)The operation and maintenance expenses including insurance shall be derived on the basis of the average of the actual operation and maintenance expenses for the five (5) years ending March 31, 2004, based on the audited financial statements, excluding abnormal operation and maintenance expenses, if any, subject to prudence check by the Commission.
(b)The average of such operation and maintenance expenses shall be considered as operation and maintenance expenses for the financial year ended March 31, 2002 and shall be escalated at the rate of 4 per cent per annum to arrive at operation and maintenance expenses for the base year commencing April 1, 2005.
(c)The base operation and maintenance expenses for each subsequent year shall be escalated at the rate of 4 per cent per annum to arrive at permissible operation and maintenance expenses for such financial year.
Provided that in case, an existing generating station has been in operation for less than five (5) years as at April 1, 2004, the average shall be computed for such shorter period for which such generating station was in operation and such average shall be treated as the operating and maintenance expense for the base year commencing April 1, 2004. The operation and maintenance expenses for any subsequent financial year shall be computed in accordance with clause (c) above.
34.6.2New generating stations
(a)Thermal generating stations
(i) Coal-based generating stations
  200/210/250 MW sets : Rs. 10.82 lakh/MW
  500 MW and above sets : Rs. 9.73 lakh/MW
Note : For the generating stations having combination of 200/210/250 MW sets and 500 MW and above set, the weighted average value for operation and maintenance expenses shall be adopted.
(ii) Gas Turbine/Combined Cycle generating stations other thansmall gas turbine power generating stations
  With warranty spares of 10 years : Rs. 5.41 lakh/MW
  Without warranty spares : Rs. 8.11 lakh/MW
(iii) Small gas turbine power generating stations : Rs. 9.84 lakh/MW
(iv) Lignite-fired generating stations : Rs. 10.82 lakh/MW
The above operation and maintenance expense norms are for the base year commencing April 1, 2005, which shall be escalated at the rate of 4 per cent per annum to arrive at permissible operation and maintenance expenses for the relevant year of tariff period.
(b)Hydro power generating stations
The base operation and maintenance expenses shall be fixed at 1.5 per cent of the approved original cost of the project, in the year of commissioning, and shall be escalated at a rate of 4 per cent per annum for the subsequent years.