RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD.
Bonds CARE A (SO)
Rating a technocrat, is the Chairman & Managing Director of
the company. Other Directors include Shri Yaduvendra
CARE has retained the CARE A (SO) [Single A
Mathur, IAS, who is also the Secretary (Energy), GoR
(Structured Obligation)] rating assigned to the
and Shri R. K. Agarwal (IAS retd.), Director (Finance),
outstanding bond issues of Rs.455.11 Cr of Rajasthan
who looks after the finance functions of all the five power
Rajya Vidyut Utpadan Nigam Limited (RVUN). The rating
sector utilities of Rajasthan including RVUN. A proper
is primarily based on an unconditional and irrevocable
system has been put in place to ensure timely
guarantee from Government of Rajasthan (GoR) for the
arrangement of funds for repayment, working capital and
payment of interest and repayment of principal. The
capital expenditure requirements. He is also supported
timely debt servicing is also facilitated by a Structured
by a team of professional and experienced persons.
Payment Mechanism (SPM) through escrow cover of
receivables from sale of power and wheeling and load Operations of the Company
despatch charges.
The total installed capacity of RVUN was 2,569 MW as
The rating factors in the dependence of RVUN on GoR on March31, 2006 comprising of 2,405 MW of thermal
for timely servicing of its debt issues. The increasing (coal & gas based) power stations & 164 MW of hydel
revenues of GoR, improvement in deficit indicators and plants. Nearly 9% of total units generated (18,865 MU)
liquidity are some of the positive factors considered while was auxiliary consumption. While average Plant Load
reviewing the rating. Underdeveloped socio-economic Factor (PLF) of Kota Thermal Power Station (KTPS) and
infrastructure, high sensitivity of agricultural production Suratgarh Thermal Power Station (STPS) were better
to frequent droughts in the state, continuing budgetary at 90.60% and 90.88% respectively for FY06, that of
imbalances of GoR leading to high level of fiscal deficit Ramgarh Gas Based Station (RGBS) and Hydel plants
and high level of outstanding debt are the constraining were low at 41.51% and 15.33% respectively. The
factors. Ability of GoR to check its debt levels and average cost of generation for FY'06 was Rs.2.03 per
committed expenditure which could help reduce its unit against Rs.2.01 per unit for FY'05 on account of
revenue & fiscal deficit continue to be the key rating increase in cost of fuel whose contribution in total costs
sensitivity. increased from 76% in FY'05 to 78% in FY'06.
About RVUN To meet the growing demand of electricity in the State,
RVUN was incorporated in the year 2000 as a power six thermal power projects aggregating 1525 MW
generation company after unbundling of erstwhile capacity are under implementation with an estimated
Rajasthan State Electricity Board (RSEB). RVUN cost of Rs.6721 crore, of which Rs. 2440 crore of
operates the power generation plants in the state and expenditure is budgeted for FY07. These are expected
sells power to the Rajasthan's discoms, other to be commissioned by FY '09. Apart from these, another
states'discoms and power trading companies through 2330 MW generation capacity is planned to be added
the use of transmission network of Rajasthan Rajya during FY10 to FY12 at an estimated cost of Rs.7,062
Vidyut Prasaran Nigam Ltd. (RVPN). crore.
Management Financial Parameters
Considering the 100% shareholding by GoR, the During FY'06, total income increased by 9.7% as
Directors are appointed by GoR. Shri N. S. Chaudhary, compared to the previous year. However, PBILDT
CREDIT ANALYSIS & RESEARCH LIMITED 1
Financial Results
(Rs. crore)
For the period /As on ended March 31, 2001-02 2002-03 2003-04 2004-05 2005-06
Working Results Audited
Income from sale of power 1970 2603 2800 3171 3483
Total Income 2138 2661 2859 3203 3515
PBILDT 696 773 887 707 657
Surplus(+) / Deficit (-) 0 0 0 0 0
Gross Cash Accruals 186 246 300 200 202
Financial Position
Equity Capital 1288 1497 1656 1776 1976
Tangible Net worth 1286 1483 1609 1690 2099
Key Ratios
Profitability (%)
PBILDT Margin 32.6 29.0 31.0 22.1 18.7
Solvency
Interest coverage (times) 1.04 0.94 1.02 0.96 0.97
Overall gearing (times) 3.03 3.15 2.86 2.79 2.25
Liquidity
Current Ratio (times) 1.80 1.80 1.50 1.46 1.39
Quick Ratio (times) 1.53 1.67 1.39 1.24 1.23
margin decreased in FY'06 as compared to the previous growth rate of 2.1% p.a. The average population density
year as a result of increase in cost of fuel. Current ratio of the state at 165 persons per square kilometer as
was 1.39 times on March 31, 2006 mainly on account compared to the All India average of 324 persons per
of high level of receivables. Overall gearing was high at square kilometer, is amongst the lowest in India.
2.25 times as on March 31, 2006. The tariff charged by
Mineral is one of the major natural resources of the state.
RVUN was Rs.2.03 per unit in FY'06 on an average
A large number of ceramic, ferrous and non-ferrous
basis.
metallic minerals are found and produced in the state.
RVUN would operate on a no-profit-no-loss basis till Despite the abundance of natural resources, Rajasthan
FY'09 as per the new Financial Restructuring Plan (FRP) is still to emerge as an industrially developed state.
approved in Nov'05. For its capital expenditure plans Rajasthan is well known for art & culture and is one of
also, GoR support has been committed vide the the most attractive destinations in India for both domestic
approved FRP. and international tourists.
As the credit rating of RVUN's bonds draw strength from With its meagre water resources and perilous
GoR guarantee for debt servicing, an analysis of GoR's dependence on scanty, low and uncertain rainfall,
financial position is given below. Rajasthan is vulnerable to drought. During the last few
years, Rajasthan has been affected by drought with
Economic Structure of Rajasthan varying degree of intensity.
Rajasthan is geographically the largest state in India Due to vast areas of Rajasthan being desert areas, the
with an area of 3.42 lakh sq. km. The population of state compares unfavourably with all India average on
Rajasthan is 56.5 million as per 2001 census parameters like length of rail & road network and no. of
(Provisional) and it has one of the highest population bank branches. The monsoon dependent agriculture,
growth rates of 2.8% p.a. during 1991-2001 amongst segmented pattern of human settlement, recurring
the Indian states as compared to the national population drought conditions in some areas and the
2 CAREVIEW
underdeveloped socio-economic infrastructure continue accounted for about 7.7% of total revenue expenditure.
to act as hindrances to the growth of the state.
GoR's Capital Receipts have grown at a CARG of 5.3%
During FY06, growth in the primary sector remained flat. during 2001-2006 period, driven by growth in debt from
This was due to the 26% decrease in production of Kharif Central Government and internal debt. The borrowings
crops on account of erratic and less than normal rainfall are mainly utilized to fund the revenue deficit and capital
during the year. However, 8.8% growth in secondary expenditure of the state.
sector and 5.9% in tertiary sector resulted in a 5.4%
Level of GFD, which had risen over the last many years,
increase in GSDP at constant prices. While primary
decreased during FY05 and FY06 mainly on account of
sector accounts for 28% of GSDP, secondary and
lower RD. For FY06, GFD reduced by 17%. For all years
tertiary sectors account for 28% and 44% respectively.
from 1999-2000 to 2004-05, GoR had primary deficit.
The per capita income for the year 2005-06 at current However, for FY06, state has reported primary surplus
prices was Rs.17,695 as compared to Rs.15,673 for after many years. Hence, GoR could increase its
2004-05 with increase in GSDP. However, the per capita developmental expenditure, which has grown at a CARG
income of the state is still well below the All India of 28% during the last three years, with a major focus
average. on irrigation projects. Few of them are Indira Gandhi
Irrigation project, Chambal project, Narmada project and
Finances of Government of Rajasthan
Ganganagar project.
GoR continues to suffer from budgetary imbalances RD/GFD ratio had remained high in the range of 61% -
characterized by revenue deficit and high level of fiscal 68% for four years upto FY03. With the reduction in RD,
deficit. Nonetheless, overall economic upturn, tax the ratio improved to 34.9% and 12.8% for FY05 and
reforms and recovery focus initiated by GoR in the past FY06 respectively.
few years has enabled the state to increase its revenues
and thereby, reduce its revenue deficit. Sustainability Committed revenue expenditure (salary, pension and
of improvement in the revenue account in the coming interest payments) accounts for about 63% of total RE
years, however, remains to be seen. and more than 65% of total RR of the state, on which
the state does not have much control. Still, as efforts in
Revenue receipts of GoR have increased by 17.3% that direction, GoR has introduced contribution based
during FY06. This was due to increase in non-tax fully funded pension scheme for new employees and
revenue (27%), Stamp duties (26%), increase in share medical insurance scheme instead of reimbursement of
in central taxes (23%), State excise (19%) and Sales expenses. Interest expenses are expected to decrease
tax (17%). GoR has comparatively low sales tax base due to swapping of high cost debt under the debt-swap
with sales tax accounting for just 27% of RR in FY06. scheme introduced by Central Government. To suggest
Other major sources of tax revenue were state excise measures to control expenditure, GoR has set up an
(7.3%), Motor Vehicle Tax (5.5%) and stamp & Expenditure Reforms Commission. Implementation of
registration fees (4.9%). GoR's non-tax revenue as the recommendations of 12th Finance Commission
percentage of total revenue has been in the range of would also help in reduction of interest expenditure.
12-14%, over the last few years.
Sectoral Reforms
During the three year period from FY03 to FY06,
GoR has implemented some measures to improve
development expenditure has grown at a CARG of
administration of various departments including rating
10.6% (5.4% during FY01-FY03) as compared to 4.8%
system for ministers, time bound targets for different
(7.8% during FY01-FY03) growth in non-development
departments, increasing co-ordination among
expenditure. This indicates that government's ability to
departments, etc.
reduce RD has given it an opportunity to increase
developmental expenditure. Nearly one-fourth of the On the power sector front, in spite of unbundling of
revenue expenditure in FY06 was for interest and debt RSEB, the Transmission & Distribution (T&D) losses
servicing. Pension and miscellaneous services continue to remain high. However, the concentrated
CREDIT ANALYSIS & RESEARCH LIMITED 3
Brief Financials of GoR
(Rs. crore)
Particulars 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 CARG
Actual BE (01-06)
Revenue Account
Revenue Receipts 12153 13082 15424 17764 20839 23991 11%
64% 64% 65% 71% 75% 78%
Revenue Expenditure 15949 17016 18848 19906 21499 24034 7%
84% 83% 79% 79% 79% 78%
Surplus/(Deficit) (3796) (3934) (3425) (2143) (660) (43)
Capital Account
Receipts 6236 8055 8697 7290 7074 6690 5%
33% 40% 36% 29% 25% 22%
Expenditure 3045 3492 5092 5273 5721 6586 18%
16% 17% 21% 21% 21% 22%
Surplus/(Deficit) 3191 4563 3605 2018 1352 104
Aggregate Receipts 19086 20301 23885 25054 27913 30681 10%
Aggregate Expenditure 18994 20508 23941 25179 27220 30620 9%
Primary Deficit (1,870) (1,814) (2,595) (974) 59 662
Gross fiscal Deficit (5,748) (6,114) (7,372) (6,146) (5,151) (5,141)
Overall Surplus/(Deficit) 92 (207) (55) (125) 692 61
RD / GFD (%) 66.0% 64.3% 46.5% 34.9% 12.8% 0.8%
RD / GSDP (%) 4.3% 4.7% 3.3% 1.9% 0.5% 0.1%
GFD / GSDP (%) 6.5% 7.2% 7.0% 5.6% 4.2% 3.8%
BE : Budget Estimates
GSDP for 2005-06 is advance estimates as per Socio-Economic Review
efforts to reduce these losses are initiated viz. metering State plans to add new power generating capacity of
to identify the power pilferage zones, replacement of 3855 MW to be commissioned by FY12, of which work
transformers, installation of feeders under the Feeder for 1525 MW has already started at five different
Renovation Programme (with a focus on metering at the locations. State has also set up three subsidiaries under
feeder and transformer levels as against the consumer level Rajasthan Rajya Vidyut Utpadan Nigam Ltd. (RVUN)
so as to minimize susceptibility to tampering), laying of for power plants at separate locations viz. Giral, Dholpur
insulated lines etc. State has also initiated efforts to and Chhabra. This would facilitate attracting private
equity and thus, divest GOR's stake in RVUN.
encourage public/private partnership in power sector.
The centralised cash flow mechanism of all the five
New Financial Restructuring Plan (FRP) for the power
unbundled entities is also planned to be dismantled in
sector, which was approved by GoR in Nov'05, ensures
a phase-wise manner. RVUN cash flow was separated
focussed investments in the power sector utilities to
in Nov'06 and Discoms cash flow is planned to be
improve financial condition of these utilities and to achieve
separated by July'07.
the objectives of State Energy Policy, 2005. As per FRP,
Rs.23,537 crore is planned to be invested in the sector Non-conventional Electricity Sources Policy, 2004 has
upto FY12 to make the state self sufficient in energy been issued to promote electricity generation through
requirements and reduce the distribution losses to 20%. Bio-mass gas, Wind Mills and Solar Energy.
4 CAREVIEW
Under APDRP scheme of central government, swapped high cost debt of about Rs.6690 crore which
Rajasthan has got 6% (Rs.385 crore)of overall release is expected to result into annual saving of about Rs.400
of funds by centre to all states (Rs.6306 crore) upto June crore. As per the RBI guidelines, GoR has also set-up a
30, 2006. Guarantee Redemption Fund which had a corpus of
Rs.98 Cr as on March 31, 2006.
On the industrial front also, various measures have been
taken. Under the Single Window Clearance Scheme, The total outstanding liabilities (including guarantees) of
1498 projects were given clearance involving an GoR were high at 60.7% of its GSDP. Total outstanding
investment of Rs.10,618 crore in the state upto debt was about 2.93 times the size of RR for FY06.
September'05. To promote garment export, Apparel Park Liquidity
is proposed to be established at Mahal near Jaipur with
GoR did not avail WMA for FY06 as compared to 21
an investment of Rs.32 crore. Also, Gems & Jewellery
days for FY05. Thus, while this facility was earlier being
Park, Agro food Park, SEZ, Handicraft Park and IT Park
used as a regular means of financing the state
is planned and work is under progress. To supplement plan
government's expenditure, of late, the need for this
resources for the road development, a 'Road Development
facility hasn't arisen.
Fund Act - 2004' was passed. Cess levied on petrol and
diesel of about Rs.200 crore per annum is being utilised for The state government has not taken any overdraft for FY05
this fund only. A mega project for development of four State and FY06 as compared to overdraft for 151 days in FY04.
Highways with an investment of Rs.1500 crore has been Thus, liquidity position of GoR seems to have improved.
launched in joint venture with IL&FS. Prospects
Rajasthan has implemented VAT from April 1, 2006. The Consequent to enactment of the FRBM Bill, state's
central government has assured compensation against efforts to meet its targets would be critical for potential
decrease in tax collection due to VAT for first year. While waiver of debt repayment obligations as per 12th
the first year (FY07) after the implementation of VAT is Finance Commission guidelines, especially in light of
going to be revenue neutral in its effect, it is expected the fact that reduction in revenue deficit had mainly been
to prove helpful to the State in the long run. on account of increase in revenue receipts and debt
swap which reduced the interest outgo. Effective control
Debt Management
& implementation of its plans to reduce T&D losses in
Controlling debt and deficit has been the focus area of the power sector would also be crucial. GoR's efforts to
GoR. It enacted the Fiscal Responsibility and Budget contain the committed expenditure, debt levels and
Management (FRBM) Bill, 2005 based on which it plans improvement in the irrigation infrastructure would play
to reduce the RD to zero level and reduce GFD to 3% a vital role in overall improvement in the State's
of GSDP by 2008-09. Upto March 31, 2005, GoR economic and financial strengths.
For Further details please contact at : December 2006
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based its ratings on information obtained from sources believed by it to be accurate and reliable. CARE does not, how-
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