Supplementary ARR 06-07 - Delhi Transco Limited

DELHI TRANSCO LIMITED(A Govt. of NCT of Delhi Undertaking)(Regd. Office: Shakti Sadan, Kotla Road, New Delhi-110002)33 KV Grid S/Station BuildingIP Estate, New Delhi-110002Ph.: 23370409; Fax 23370477No.: F.DTL/203/05-06/GM (Comml)/F-1/______ Dated: 30.3.2006The Secretary,Delhi Electricity Regulatory Commission,Malviya Nagar,New Delhi – 110 017Sub: ARR petition for FY 2006-07 & Tariff DeterminationThis is with reference to letter no. F.3(119)/Tariff/DERC/4310 dated 13.2.2006 videwhich Commission has identified data gaps/information requirement on preliminaryscrutiny of ARR petition for FY 06-07. The point-wise reply/information on thequeries/issues raised therein along with duly notarized affidavit is furnished hereunderfor kind consideration of the Hon’ble Commission:1. Accounting Detailsi. The Petitioner has not submitted the provisional Accounts for the period of firstsix month as on 30 th September 2005. The same may please be submitted now.TRANSCO ResponseThe Provisional Accounts for the period 1 st April 2005 to 30 th September 2005are attached herewith as Annexure-I.ii.It is observed that the balance of profits and loss brought forward shown in theaudited accounts for FY 2003-04 does not match with the amount shown inAnnual accounts for FY 2002-03. The Petitioner is therefore, requested to furnishclarification for the same.TRANSCO ResponseIt is clarified that ‘Deferred Tax’ after setting off deferred tax liability has notbeen considered in accounts 2003-04 on prudent basis as the company is notcertain about the future availment of such benefit as such the ‘Balance of profitand loss brought forward from last year’ includes Deferred Tax Assets-Rs.35558.43 lakh in the audited accounts for FY 2003-04. This has been verifiedby the Statutory Auditors.DTL Deficiencies ARR-06-07 1

There is no difference in the closing balance of profit & loss account of AnnualAccount 2002-03 and opening balance audited account for 2003-04.iii.In the petition, the petitioner has mentioned that an amount of Rs. 204.88 cr.has been received in FY 2005-06 towards power purchase refunds from variousentities. However, the amount of refund received from various entities towardspower purchase has not been furnished by DTL separately. It is requested thatthe same may be furnished now for FY 2002-03 onwards to FY 2005-06segregating into refunds received for DVB period and DISCOM period. Thereason for not furnishing the refund amount, if any, received during FY 2004-05 or earlier in the respective ARR petition may also be furnished.TRANSCO Response:TRANSCO would like to submit that the breakup of amount of Rs. 204.88 crorereceived in FY 05-06 towards power purchase refunds from various entitiesmainly relating to past period and details are enclosed as Annexure-II. Out ofRs. 204.88 crore, Rs. 71.77 crore pertains to DVB period, and so credited toDPCL in FY 05-06 and balance amount of Rs. 133.11 crore pertains to DTLperiod. Further out of Rs. 133.11 crore, an amount of Rs. 132.19 crore hasbeen accounted for in Audited Accounts for the FY 04-05 and the balanceamount of Rs. 0.92 crore is being accounted for in FY 05-06 towards powerpurchase adjustments.The details of the adjustments made by CPU for the period 2001 to 2004 wereearlier furnished vide letter no. GM comm. (F-1/203/81) dated 27.5.05 at S.No.6 to the Hon’ble Commission while processing ARR petition of TRANSCO forFY 05-06. Copy of the reference is again enclosed for ready reference asAnnexure-II A.iv.The refund received by DTL on account of Development Surcharges asreflected in the audited accounts of FY 2004-05 is Rs. 38.56 cr. However, thesame has also not been adjusted in truing up of expenditure of FY 2004-05. Itis also noted from footnote at page-51 of the petition that Rs. 71.77 cr. ofrefund amount, which stated to be pertaining to DVB period has been creditedto DPCL. This needs to be elaborated.As regards, Power Purchase Cost, it is noted that the refund amount receivedin the year FY 2004-05 has not been adjusted in truing up of expenses for theFY 2004-05 shown at page 49 of Vol – I of the petition. It has also beenobserved that the full amount of the refund received during FY 2004-05 hasnot been reflected in the audited accounts and the break up given in thefootnote of page 51 of the petition does not aggregate to the total refundfigure mentioned in the footnote.DTL Deficiencies ARR-06-07 2

TRANSCO ResponseThe amount of Rs. 38.56 crore received by TRANSCO on account ofdevelopment surcharge has already been accounted for in Audited Accounts forthe FY 04-05 as miscellaneous receipt. The same amount has already beenincluded under the head Schedule 16 of the Balance Sheet for the FY 04-05against adjustment to power purchase cost of Rs. 75 crore. TRANSCO wouldlike to bring in the notice of the Hon’ble Commission that the said amount hasalready been adjusted in Truing up of expenditure for FY04-05 (shown at page49 of Vol-I of ARR petition) and the details of the same are as under:Table 1: Details of Expenditure for FY 04-05Sr. No Description (Rs. Cr)FY 04-05 (Actual)1 Purchase of energy 5,061.302 Sale under UI 627.973 Net Purchase of energy (1-2) 4,433.334 Employees costs 40.505 A&G Expenses 27.516 Repairs and Maintenance 11.407 Interest Cost 15.158 Depreciation 27.739 Carrying Cost -10 Reasonable Return 32.6211 Contingency Reserve 2.0212 Preliminary Expenses 0.2713 Prior Period Expenses 44.38Total Expenditure 4634.90The amount of Rs. 71.77 crore received from NTPC was pertaining to theperiod April 2001 to June 2002 i.e. DVB period and was thus payable to DPCLas per the transfer scheme and has been so debited.Regarding full amount of power purchase refund received during FY 04-05,TRANSCO submits that the amount pertaining to FY 04-05 has already beentaken up in the Audited Accounts of FY 04-05 against power purchase accountand amount pertaining to previous years have been booked in power purchaseadjustment account, year-wise details are furnished in Annexure-III. TRANSCOreiterates that the refund amount received in the FY 04-05 has already beenaccounted for while truing up of expenses for the FY 04-05.v. The petitioner is requested to clarify if regulatory accounts are beingmaintained, and if so, the same may be furnished.DTL Deficiencies ARR-06-07 3

TRANSCO ResponseThe petitioner submits that in the Commission’s Order dated 7 TH July 2005regulatory assets were neutralized while truing up the expenses for FY 04-05,since TRANSCO had no deferred expenses to be met up with regulatory assets.So, Transco is not maintaining any regulatory accounts.vi.The petitioner may provide the complete reconciliation of “revenue from sale ofpower” as per audited accounts of company for FY 2004-05 and as shown inthe ARR under the head “truing up for FY 2004-05” with jurisdictions for thedifferences.TRANSCO ResponseAs per the Audited Accounts for FY 04-05, the revenue from sale of power (Rs.4569.65) includes sale to the DISCOMs, NDMC, MES and sale under UIaccount. Where as the sale of power amount shown in the ARR Petition undertruing up for FY 04-05 i.e. Rs. 3942 crore excludes UI sales of Rs. 627.97Crore.2. Energy Requirementi. The petitioner has assumed a growth of 2% during the 2 nd half of the currentyear as the increase in energy requirement. The Discoms, however, haveproposed a reduction in energy requirement during the second half of thecurrent year based on the past trends. The petitioner may please providereasons for the mismatch as the projections by the petitioner are stated to bebased on the projections given by DISCOMs.TRANSCO ResponseTRANSCO would like to submit that the TRANSCO has assumed the growth of2% on the actual sales for the period Oct 04- Mar 05 based on past trends.However actual sales to the DISCOMs for the period Oct 05 to Jan 06 comes to6428 MUs against 6386MUs projected by the TRANSCO in ARR petition. Theactual sales to the DISCOMs for the period Oct 05-Jan 06 is showing an increaseof 3.46% over FY Oct 04-Jan05 which is more than the 2% increase projectedby the TRANSCO for the same period. The commission is therefore requested toconsider the actual/projected growth rate at the time of determination of ARRfor FY 06-07 as deemed fit.DTL Deficiencies ARR-06-07 4

ii.The petitioner may also submit the details of basis for calculation of peakrequirement for FY 2006-07 as provided in Table 10 on page 17 of Vol-I of ARR.TRANSCO ResponseTRANSCO would like to submit that to meet the peak requirement during FY 06-07, the additional quantum of power is required to be purchased which is asunder:Table 2: Peak Requirement for FY 06-07PeriodPeak Reqmt(in MW)Energy(in MUs)Proposed Duration ofPurchaseApril-06 200 72 12.00 – 24:00 HrsMay-06 300 112 12.00 – 24:00 HrsJune-06 500 180 12.00 – 24:00 HrsJuly-06 600 223 12.00 – 24:00 HrsAugust-06 600 223 12.00 – 24:00 HrsSeptember-06 500 180 12.00 – 24:00 HrsOctober-06 100 19 17:00 – 23:00 HrsNovember-06 100 18 17:00 – 23:00 HrsDecember-06 200 37 06:00 – 12:00 HrsDecember-06 200 37 17:00 – 23:00 HrsJanuary-07 200 37 06:00 – 12:00 HrsJanuary-07 300 23 17:00 – 23:00 HrsFebruary-07 100 17 06:00 – 12:00 HrsFebruary-07 100 17 17:00 – 23:00 HrsTotal 1,195The basis for calculation of additional requirement to meet the peak demandduring the FY 06-07 has been arrived at considering the fact that the availabilityfrom HPSEB which was to the tune of 80-440 MW during April 05 to October 05apart from the additional allocation from HP Govt’s share in Naptha Jhakri i.e. tothe tune of 11% during April 05 to June 05 and 6.5% during the period July 05to October 05, is not available during the FY 06-07. HP Govt has decided totrade its share in various Central Sector Hydro Generating Stations along withthe equity participation of SJVNL (650 MW) through Power Trading Agencies.The expected shortage during November 2006 to March 2007 has been assumedbased on the data available for the current year 2005, which corresponds toNovember 2005 to March 2006. A growth rate of 2% has also been taken intoconsideration for arriving at the shortage condition. Minutes of the meetingtaken on 13.12.2005 by Secretary (Power), Govt. of India to review the powersupply position in Delhi is enclosed as Annexure-III-A.iii.The petitioner is also resorting to banking of energy with other utilities. Thequantum of energy banked and its subsequent adjustments for the years 2004-05 & 2005-06 may be furnished. Quantum of energy banked is presumed to beDTL Deficiencies ARR-06-07 5

available subsequently without any costs. This may be furnished and shownaccordingly in various calculations.TRANSCO ResponseThe details of energy banked with HPSEB as under:Table 3: Energy Banked with HPSEBMonthQuantum of Energy in MUsDecember 2005 22.544January 2006 31.3215February 2006 31.000Total Energy in MUs 84.8655As per the agreement, TRANSCO is entitled for 38 MW power on round the clockbasis during the period June 2006 to August 2006 for the energy transferred toHPSEB during the period December 2005 to January 2006. There are no furtherbanking arrangements made by DTL with any agency so far.3. Energy Availabilityi. The petitioner may please submit the basis for calculation of its share inunallocated capacity of Central Generating Stations. The basis for assumingtransmission losses for power purchase from other sources as provided in Table19 on page 27 of Vol-I of ARR may also be submitted.TRANSCO ResponseTRANSCO would like to submit that the allocation of an unallocated quota (15%in most cases) is decided by the GoI from time to time according to therequirements of various sates in the region. During summer months from April2006 to October 2006 the allocation of unallocated portion of CGS has beenassumed at 15% during day peak i.e.11.00 hours to 19.00 hours and 25%during evening peak i.e. 19.00 hours to 24.00 hours. The allocation for the restof the period of the year is assumed at 15% during morning peak hours i.e.06.00 hours to 12.00 hours and 25% during evening peak hours i.e. 18.00 hoursto 23.00 hours. Table 4 summarises the share of TRANSCO from unallocatedshare of NTPC & NPC plants.Table 4: Share of DTL from unallocated share of NTPC & NPC PlantsApr-SepOct-Mar00-11 hrs 11-19 hrs 19-24 hrs 00-06, 12-18, 06-12 18-22 hrs.22-24 hrs. hrs.0.00% 15.00% 25.00% 0.00% 15.00% 25.00%DTL Deficiencies ARR-06-07 6

In order to calculate the transmission losses for Gridco and SR Power, TRANSCOhas assumed a cumulative loss of 9% based on the losses during winter seasonin eastern and northern region which are in the range of 8 – 8.7%. Further, dueto non-availability of corridor, power from SR Power of eastern region hasrouted through the western region, so western region losses are also consideredwhile projecting the transmission losses.ii.The petitioner may also submit the station-wise, month-wise energy availabilityfrom I.P. GENCO and PPCL. There is a mismatch between the energy proposedto be purchased from PTC (Under Other Sources) for the 2 nd half of FY 2005-06(304 MUS) as provided in Table 20 on page 27 of Vol-I of ARR and as provide inForm 1.3(b)-1 of Vol-II of ARR. (198 MUs). The petitioner may submit reasonsfor the mismatch. The quantum of energy sold to Licensees from April 2005-September 2005 as provided in Table 21 on page 28 of Vol-I of ARR does notmatch with the quantum as provided in Annexure 4 on page 78 of Vol-I of ARR.The petitioner may provide reasons for the mismatch.TRANSCO ResponseThe station-wise, month-wise energy availability from I.P, GENCO and PPCL is asper the data provided from LBGR study of NREB and a copy of the same isattached herewith as Annexure-IV.TRANSCO would like to submit that the energy proposed to be purchased fromPTC under head other sources for the 2 nd half of the current year as provided inthe Table 20 on page 27 of Vol-I of ARR be taken as correct where as there isan error in Form 1.3(b)-1. TRANSCO would like to request the Hon’bleCommission to consider the revised Form 1.3(b)-1, which is attached asAnnexure-V.In Table 21 of Vol-I of ARR the petitioner has considered net sale & purchase ofpower under UI where as in Annexure 4 petitioner has shown the net sale ofpower under UI account.4. Form 1.3b – Power Procurement Costsi. The petitioner may please submit the details for calculation of TransmissionCharges payable to Power Grid, which it has estimated at Rs. 149.81 cr. and Rs.150 cr. for the FY 2005-06 and FY 2006-07, respectively. The petitioner maysubmit the details of orders issued by CERC for determination for transmissioncharges in case of PGCIL for the FY 2004-05 to FY 2006-07.DTL Deficiencies ARR-06-07 7

TRANSCO ResponseTRANSCO would like to submit that the transmission charges payable to thePower Grid for the transmission of power from Central Generating Stations areestimated based on the actual transmission charges paid to PGCIL from April2005 to September 2005. These are based on the weighted average capacityallocation from the central stations to TRANSCO. The proportionate capacitycharges are arrived on the annual fixed charges to be paid to Power Grid.The total charges paid to PGCIL during first half of current year is afteradjustment of Rs. 3.05 Crore refund received from PGCIL. Therefore, the netamount paid to PGCIL for the same period is Rs. 75.53 crore. Similarly, for thesecond half of current year a refund of Rs. 99 Lakh from PGCIL has been takeninto consideration and the net amount payable for the second half is Rs. 74.29crore.ii.The calculations for wheeling charges, RLDC and ULDC charges to be paid mayalso be submitted. Further, the petitioner may submit the detailed break-up of“Other Sales” component of power procurement costs.TRANSCO ResponseIn order to calculate the wheeling charges for FY 06-07, TRANSCO hasconsidered the BBMB wheeling charges of Rs. 1.36 crore and Rs. 1.10 crore forpower wheeled through Noida-Gazipur circuit.The ULDC and RLDC charges are payable on the basis of capacity allocationfrom Central Sector Generating Stations. These charges are on the basis ofactuals for the period April 05 to September 05 and computed on the basis ofanticipated weighted average capacity allocation of Central Sector GeneratingStations. However, it is mentioned that RLDC charges have been merged withULDC charges w.e.f. November 2005 as per CERC order.iii.The power purchase cost estimated by the petitioner for FY 2005-06 and FY2006-07 for sale to different Licensees do not match with total power purchasecost figure worked out based on power purchase cost estimated by eachDISCOM in their petitions. This needs to be reconciled.TRANSCO ResponseTRANSCO would like to submit that the power purchase cost projected by theDISCOMs is infact Bulk Supply price of TRANSCO and cannot match with thepower purchase cost of TRANSCO.DTL Deficiencies ARR-06-07 8

iv.The petitioner may submit the exact nature and break up of power purchaserefunds of Rs. 204.88 cr. (page 14 of Vol-I of ARR) and confirm that suchrefunds are fully accounted for.TRANSCO ResponseTRANSCO would like to submit that Rs. 204.88 Crore received in FY 05-06 hasalready been adjusted, which is summarized as under:Table 5: Break up of Adjustment of Rs. 204.88 CroreCredited to DPCL in FY 05-06 as it pertains to DVBperiodBooked under ‘Disputed Claims’ Account in FY 04-05(under provision)Adjustment made in ‘Power Purchase’ Account in FY04-05The amount pertains July 2002 to March-04 has alsobeen adjusted in power purchaseBalance to be adjusted in FY 05-06TotalRs. 71.77 CroreRs. 77.19 CroreRs. 45.79 CroreRs. 9.21 croreRs. 0.92 CroreRs.204.88 croreAs depicted in Table 5, an amount of Rs. 77.19 crore has been kept against theDisputed Claims Account as per the accounting principles. However the samehas been considered in the revenue receipt of FY 2005-06 (Refer Table 45 of VolI Of ARR). It is submitted that the liability if any arises due to the Court decisionthe same shall be recovered through the ARR in the respective year.v. The petitioner may submit the actual power purchase bills up to January 2006and estimate of amount for next 2 months up to March 2006 and FY 2006-07.TRANSCO ResponseDetails/Bills of source-wise power purchase made by the TRANSCO during thecurrent year upto January 2006 are attached herewith as Annexure-VI andestimates for the next 2 months up to March 2006 and FY 06-07 is alreadyfurnished in the Volume II of ARR petition for FY 06-07. Commission may kindlyrefer page no 47 to 62 of Volume II of ARR for FY 06-07.5. Form 1.1 – Capital Basei. The petitioner may specify the target dates to identify the intangible assetstransferred to it through the Transfer Scheme as we are entering the final yearof the Policy Direction.DTL Deficiencies ARR-06-07 9

TRANSCO ResponseAs per schedule-Part-I of Transfer Scheme, there is no intangible assettransferred to DTL.ii.The petitioner has submitted the capital expenditure plan envisaged for the FY2005-06 and FY 2006-07 as given in Table 31 of page 38 of Vol-I of the ARR.The petitioner may submit the scheme-wise details of capital expenditureincurred upto December 2005 and estimated amount to be incurred for eachscheme during the next three months upto March 2006 and for FY 2006-07. Thefigures are also not matching with the annexure-13 attached. Also, pleasesubmit the expected date of commissioning of all assets to be capitalised duringFY 2005-06.TRANSCO ResponseScheme wise details of capital expenditure incurred up to December 2005 andestimated amount to be incurred for each scheme during the next three monthsup to March 2006 and FY 06-07 are enclosed as Annexure-VII.iii.The petitioner may also submit the details of capitalisation of establishmentexpenses.TRANSCO ResponseTRANSCO would like to submit that the details of capitalization of establishmentexpenses are available in Form 1.1e-3b & 1.1e-3c of Vol-II of ARR Petition. Thecommission is therefore requested to consider the same.6. Form 2.1a – Revenue ProjectionsThe petitioner may submit the month-wise revenue projection from eachLicensee/others – actual sales and revenues including other bilateraltransactions, unscheduled interchange etc. for the period upto January 2006 andestimated during the next two months upto March 2006 and for the FY 2006-07.TRANSCO ResponseActual revenue from each licensee, actual sales and revenues from other statesincluding unscheduled interchange upto Jan 2006 are attached herewith asAnnexure –VIII.DTL Deficiencies ARR-06-07 10

7. Reactive EnergyThe petitioner may submit the month-wise and licensee-wise detailed calculationof reactive energy charges for the FY 2004-05 to FY 2006-07.TRANSCO ResponseMonth-wise and licensee-wise details of reactive energy for the FY 04-05 and forFY 05-06 upto Jan 06 are attached herewith as Annexure-IX. For FY 0607,TRANSCO would like to submit that it may not be feasible to give any projectionsof reactive energy drawals by DISCOMs. It is further submitted that TRANSCOhas requested for fixing the bulk supply price on KVAh basis in which casereactive energy drawals may not have any significance.8. From 1.4 – Non-tariff IncomeThe petitioner may submit the detailed calculation of rebate claimed/receivedfrom power purchase companies (NTPC/NHPC etc.)TRANSCO ResponseTRANSCO would like to submit that the total rebate received/claimed for FY 05-06 up to Jan 06 is Rs. 70.08 crore and details of the same are furnished inAnnexure-X. Rebate may be considered as a part of power purchase cost, etc,and may be shifted from ‘Non-Tariff Income’ head.9. ExpendituresForm 1.1b – DepreciationThe petitioner may submit the asset-wise depreciation charged to arrive at thewritten down value of each asset to determine actual usage of the asset for theFY 2005-06 and FY 2006-07.TRANSCO ResponseDetails of asset-wise depreciation for FY 05-06 and FY 06-07 are attachedherewith as Annexure-XI. The depreciation in the Annexure XI for FY 2005-06and FY 06-07 have been computed based on rates as per the Companies Act visà-visthe rates adopted for ARR filing.Form 1.3e – Repair and Maintenance Expensesi. The petitioner has submitted that a growth rate of 10% has been applied to theexpenses in the current year to arrive at R&M expenses for the ensuing year.The petitioner may please submit the basis for arriving at the expenses for theDTL Deficiencies ARR-06-07 11

second half for the FY 2005-06. There is a steep increase in the Line and cableexpenses and furniture and Fixtures during the 2 nd half of the FY 2005-06 (asprovided in Table 32 on page 39 of Vol-I of ARR). The petitioner may pleaseprovide reasons for the same. The detailed justification for overall 37% increasein the expenses in Y 2005-06 over the FY 2004-05 may also be furnished.TRANSCO ResponseTRANSCO would like to submit that the Repair And Maintenance carried outduring 2004-05 might not be used as a guide to gauge the expenditureproposed for the FY 2005-06 & 2006-07. This is on account of major renovationand overhauling of existing substations and transmission network, which needsto be maintained properly to ensure reasonable availability, reliability, andquality of supply. The major R&M activities taken during FY 05-06 are as under:• Overhauling of 11 nos. 100-MVA and 1 No. 50-MVA of 220 KV and 2 Nos. of66/33 KV voltage level power transformers has been carried out inTRANSCO;• 315 MVA BHEL make transformer at Bawana 400kV S/Stn was damaged dueto lightening on 21.08.05 wherein HV and LV bushings along with all 3 phaseOLTCs were damaged, disrupting EHV distribution network. The majoroverhauling of 315 MVA Bawana transformer has been carried out on site forthe first time by TRANSCO and this transformer has been re-energized on17.01.06;• Testing of power transformers, circuit breakers, CVTs and OLTCs were gotconducted from M/s PGCIL;• Thermo scanning of equipment has been got done from M/s PGCIL;• Overhauling of 14 nos. 220KV Circuit Breaker carried out;The increase in the lines and cable expenses during second half of FY 05-06 isdue to the provision for procurement of 4 nos cable end terminations and 2 nos.straight through Jt. Boxes for 220 kV cable have been made in the estimates ofsecond half of FY 05-06. The actual expenditure incurred by TRANSCO uptoJanuary 06 is Rs. 0.42 crore.In view of the above, TRANSCO intends to spend the amount proposed for R&Min the ARR Petition for FY 2006-07 during FY 2005-06 and 2006-07 for properupkeep of the systems.ii.The petitioner may submit actual R&M expenses upto January 2006 andestimation for 2 months upto March 2006.DTL Deficiencies ARR-06-07 12

TRANSCO ResponseActual R&M expenses upto January 2006 along with projections for remainingtwo months are attached herewith as Annexure –XII.Form 1.3c – Employee Costsi. The petitioner may please provide the details for calculation of Terminal Benefitscomponent of Employee Costs, as the increase in this cost would depend on thenumber of Employees availing terminal benefits rather than just inflation. Thedetails of Employee-wise terminal benefits who are expected to be retired duringthe FY 2005-06 and FY 2006-07 may also be furnished. The detailed justificationfor overall 42% increase in the expenses in FY 2005-06 over the FY 2004-05needs to be forwarded.TRANSCO ResponseTRANSCO would like to submit that the TRANSCO is not discharging any liabilityafter retirement of employee as the Pension Trust as per the Transfer Schemedischarges the same. For discharging the Pension liability of the existingemployees as per the provisions of FR & SR, TRANSCO is contributing towardsthe terminal benefits fund. The actual expenditure on terminal benefits duringthe year 2004-05 was Rs. 5.45 crore against this TRANSCO has projectedRs.5.67 crore for FY 05-06 and Rs. 5.89 crore for FY 06-07 towards terminalbenefit. TRANSCO has proposed an increase on 8% in the expense under thishead during FY 06-07. This increase is an estimate based on the fact that• There is a 6-7% yearly increase in the Dearness Allowance allowed by theCentral Government.• The amount would be higher as compared to earlier years due to conversionof DA to DP.TRANSCO would like to submit that the employees cost indicated in the Form1.3c-1 are as per the audited accounts as on 31.3.2005. However, there is anerror in Table 34 of Vol-I of ARR, which has been corrected and is shown underTable 5. Therefore as per Table 5 the overall increase in the expenses beforecapitalization in financial year 2005-06 over the FY 2004-05 is 3.72% instead of42%.ii.The details as shown under Table-34 are not matching with details in theaudited accounts as on 31.03.2005 and also not matching with Form 1.3c-1. Thepetitioner may provide the complete reconciliation of expenses as per theaudited accounts and as shown in the ARR with the justification for thedifferences for the FY 204-05.DTL Deficiencies ARR-06-07 13

TRANSCO ResponseTRANSCO would like to submit that the employees cost indicated in the Form1.3c-1 are as per the audited accounts as on 31.3.2005. However, there hadbeen an inadvertent error in Table 34 of Vol-I of ARR, which is regretted. Thenecessary corrections have been incorporated in the revised Table 34 and areshown as under:Table 6: Employees CostParticularsActual FY2004-05 ActualApril- SepCurrent Year FY 2005-06 FY 2006-07EstimatedOct- MarTotalProjectedSalaries 24.81 12.52 13.03 25.55 26.32Overtime 3.89 1.37 2.64 4.01 4.13Dearness Allowance 3.59 2.33 1.48 3.81 4.03Other Allowances 9.54 4.88 5.04 9.92 10.32Bonus/Ex-gratia 0.43 - 0.44 0.44 0.46Staff Welfare Expenses 0.12 0.14 0.06 0.20 0.21Adhoc payment on- - - -corporatisationTerminal benefits 5.45 2.92 2.74 5.67 5.89Other Staff Costs - - - -Medical Expenses1.84 0.74 1.17 1.91 1.99ReimbursementLeave Travel Assistance 0.09 0.06 0.03 0.09 0.10Earned Leave Encashment - - - -Leave Salary Contribution 0.19 0.01 0.19 0.20 0.21Payment under Workmen’s 0.04 - 0.04 0.04 0.04Compensation ActOthers 0.05 0.03 0.02 0.05 0.05Total 50.04 25.01 26.89 51.90 53.75Less expenses capitalized 9.55 3.18 3.42 6.60 3.70Total 40.49 21.83 23.47 45.30 50.05iii. The petitioner may furnish the actual employee expenses upto January 2006.TRANSCO ResponseActual employee expenses upto January 2006 are attached herewith asAnnexure –XIII.Form 1.3d – Administrative and General Expensesi. The petitioner may also submit the details of “Other Expenses” component ofA&G Expenses.DTL Deficiencies ARR-06-07 14

TRANSCO ResponseThe details of “Other Expenses” component of A&G expenses are as under:Table 7: Details of Other ExpensesOther Expenses (Rs.) FY 04-05FY 05-06 (Apr-Sep)Books & Periodicals 198278 83706Entertainment Expenses 539934 162549Expenses on Security 2689252 1257900Expenses on Seminar 4748817 2853489Fees & Subscription 10974973 511456Misc Expenses 788335 454307Printing & Stationery 3101566 1171103Sweeping & Cleaning 333570 567385Tender Advertisement 28845886 3182516Legal Expenses 5424663 0Auditors Expenses 312000 0SLDC Expenses 17630431 0Total 75587705 10244411ii. The petitioner may also furnish the actual expenses upto January 2006.TRANSCO ResponseActual A&G expenses upto January 2006 are attached herewith as Annexure –XIV.10. Means of FinanceThe petitioner may provide the details of actual means of financeavailed/prepared to be availed during FY 2005-06 & 2006-07 to finance capitalexpenses. The petitioner may also provide details of swapping of loans, if any,done so far.TRANSCO ResponseTRANSCO would like to submit that Plan Funds have only used for capitalexpenses. Statement showing Plan Fund released during FY 05-06 and expectedto be released during FY 06-07 is attached as an Annexure-XV. TRANSCO wouldlike to bring to the notice of the Hon’ble Commission that no swapping of loanshas been done during FY 04-05 and FY 05-06.DTL Deficiencies ARR-06-07 15

11. Compliance Status on Directives by the Commission11.1 Depreciation (D-5.9.2)The petitioner may submit the pro-rata depreciation considering actualusage/operation (in number of days) of assets during the financial year, for theassets commissioned during the financial year.TRANSCO ResponseDetails in respect of pro-rata depreciation considering the actual using/operationof assets commissioned during the year shall be submitted to the Hon’bleCommission in due course of time.11.2 Cost Audit (D – 5.9.3)The petitioner may specify the target dates to provide the cost accountingrecords as per the Cost Accounting Records Rules for electricity industry to theCommission.TRANSCO ResponseThe Company has appointed Cost Auditor M/s. H. Tara & Co. for the FY 2005-06. The cost accounting records are to be submitted to Cost Auditor on orbefore 30.6.2006.12. Fringe Benefits Tax (FBT)The petitioner may give detailed justification for – “why the Fringe Benefit Taxshould be allowed as an expense in the ARR” and also specify the details ofFringe Benefit Tax computed for the FY 2005-06 and FY 2006-07 and actualupto January 2006.TRANSCO ResponseThe GoI has levied Fringe Benefit Tax w.e.f. April 1,2005.The provision ofSection 115WA of the Income Tax which reads as under:“ 15 WA. (1) In addition to the income-tax charged under this Act, there shall becharged for every assessment year commencing on or after the 1 st day of April,2005, additional income-tax (in this Act referred to as fringe benefit tax) inrespect of the fringe benefits provided or deemed to have been provided by asemployer to his employees during the previous year at the rate of thirty percenton the value of such fringe benefits.DTL Deficiencies ARR-06-07 16

(2) Notwithstanding that no income-tax is payable by an employer on his totalincome computed in accordance with the provisions of this Act, the tax on fringebenefits shall be payable by such employer.”TRANSCO would like to submit that it is an additional tax liability, which was notthere in the previous years. Accordingly, FBT being additional income-tax to betreated in the same manner in which income-tax is treated i.e. an item of passthrough in the tariff.In view of the above, the recovery of FBT paid by the Company should beallowed from the beneficiaries like income-tax. The details of Fringe Benefit Taxcomputed for FY 05-06 (up to December 2005) is attached as Annexure-XVI.13. Other IssuesThe petitioner may also provide the details of swapping of domestic loans, ifany.TRANSCO ResponseTRANSCO would like to submit that no swapping of domestic loans has beendone during FY 04-05 and FY 05-06.Yours faithfully,Encl: as above.( M.P. AGGARWAL )General Manager (Comml)DTL Deficiencies ARR-06-07 17