New Delhi: India’s largest power generation utility NTPC Ltd and the country’s apex power sector regulator Central Electricity Regulatory Commission (CERC) continue to stick to their conflicting stands in a case before the Supreme Court that involves Rs938 crore of revenue that has been recognized by the former in its accounts for 2007-08.
In a report filed before Parliament last week, the government’s auditor Comptroller and Auditor General of India (CAG) said the utility shouldn’t have done so. Because the case was before the court, CAG said, “the income recognition should have been postponed to the extent of Rs938.30 crore as per requirement of Accounting Standard-9.”
The issue relates to CERC’s tariff order governing the sale of power from NTPC’s projects for the period between 1 April 2004 and 31 March 2009. The tariff order, fixed for a period of five years, sets the price at which this power is sold.
In defence:Chairman R.S. Sharma says NTPC’s stand is correct.Pankaj Nangia / Bloomberg
NTPC challenged this order in the Appellate Tribunal for Electricity (ATE) which decided in its favour and asked CERC to revise the prices. The regulator subsequently appealed against this decision in the Supreme Court, where it is pending.
Both NTPC and CERC claim they are in the right.
In an emailed statement, NTPC said: “In the opinion of the management, duly supported by independent legal advice, the order of the ATE is entirely in conformity with the Tariff Regulations and it is reasonable to expect ultimate collection of the revenue… In rate regulated industries like the power sector where tariff orders are finalized much after the commencement of the relevant tariff period, recognition of revenues pending final tariff orders is more of a norm than an exception. The company reviewed the matter during 2008-09 and sought opinion from a former Chief Justice of India who was of the view that the possibility of interference by the Hon’ble Supreme Court with the order of ATE is remote and opined that the company is right in recognizing the revenue in its books of accounts as per the order of ATE pending disposal of appeal before the Hon’ble Supreme Court of India.”
NTPC chairman and managing director R.S. Sharma also defended his company’s stand. “The appropriate disclosures have been given in the annual accounts of 2007-08 and further these sales have been correctly accounted in accordance with the Accounting Standard-9 and revenue recognition prescribed under section 211 (3C) of the Companies Act, 1956, and accounting policies of the company,” he added.
CERC chairman Pramod Deo said there was no question of the regulator changing its position in court. “We have gone to the Supreme Court and filed our petition, that is our stand,” he added.
NTPC turned in a net profit of Rs7,414.8 crore on revenue of Rs36,946.2 crore in 2007-08.
The utility also said it had explained its position to CAG.
“We had replied to the CAG. These facts were made known to them before the issue of the (ir) final comments,” NTPC director, finance, A.K. Singhal, added.
NTPC has a power generation capacity of 30,144MW, which it plans to ramp up to 50,000MW by 2012. The company turned in a net profit of Rs7, 827.40 crore on a revenue of Rs42,182.40 crore in 2008-09.
An analyst termed NTPC’s stand “aggressive.” “Considering the disputed regulatory order...NTPC should not have recognized this income,” added this person who asked not to be identified, given the sensitive nature of the issue.