CESC books Rs 80 crore provision on old regulatory assets

CESC Limited made an Rs 80 crore provision, net of discount unwinding, for certain old regulatory asset balances in the current period while reporting Rs 279 crore of net regulatory income for the six months ended 30 September 2026. The provision accompanies tariff appeals involving Annual Performance Review and Multi-Year Tariff orders.

Why did CESC make an Rs 80 crore provision?

CESC made the Rs 80 crore provision as a matter of prudence for certain old regulatory asset balances in the current period. The company said the amount was net of the unwinding of the discount impact, but did not identify the specific balances, disclose a gross provision amount, or provide a period-wise breakdown.

CESC’s electricity revenue is based on relevant orders of the appropriate regulatory commissions, where applicable, including Fuel and Power Purchase Adjustment Surcharge, or FPPAS, from June 2024. Regulatory income also reflects estimated adjustments for fuel costs, power purchases, revenue-account items, deferred-tax estimates and certain fixed costs under the company’s understanding of applicable regulations and available orders.

The estimates include matters relating to the Sarisatoli coal mine, which commenced operations in April 2015, and other matters pending under appeal for various years. CESC recognises these amounts assuming recovery over time in accordance with applicable regulations and prudence, while stating that necessary adjustments will be made when disputed matters reach finality.

Which CESC tariff orders are under appeal?

CESC has filed, or is in the process of filing, appeals regarding Annual Performance Review, or APR, orders for 2019-20 and 2020-21 and Multi-Year Tariff, or MYT, orders for 2023-24 to 2025-26. The company also received APR orders for 2021-22 and 2022-23 during the current period, which it said had deviated from past practices or extant regulations in certain matters.

Management said that, based on legal opinions, it is confident these matters will be adjudicated in CESC’s favour. That assessment is not a final regulatory or judicial decision, and CESC said any adjustment will be recorded once the cases reach finality.

A separate dispute concerns power purchases by CESC from one of its subsidiaries. The West Bengal Electricity Regulatory Commission, or WBERC, issued a tariff order for 2018-19 to 2025-26 that addressed certain matters differently from earlier tariff practices and left their treatment to a future truing-up exercise, with the financial impact not ascertainable.

The subsidiary has appealed the WBERC order before the Appellate Tribunal for Electricity, or APTEL, including on the grounds that the orders were issued after substantial delay. For tariff orders issued during the applicable financial years from 2022-23 onwards, the subsidiary has given effect to the orders using principles under applicable regulations; it has also filed or is preparing appeals over APR and refund orders for 2014-15 to 2022-23.

How much did regulatory income contribute to CESC’s results?

CESC reported Rs 279 crore of net regulatory income for the six months ended 30 September 2026, down Rs 26 crore from Rs 305 crore a year earlier. Over the same comparison, profit before regulatory income and tax increased Rs 77 crore to Rs 853 crore, while consolidated profit increased Rs 2 crore to Rs 857 crore.

For the three months ended 30 September 2026, net regulatory income was Rs 99 crore, compared with Rs 180 crore in the preceding June 2026 quarter and Rs 72 crore in the September 2025 quarter. Consolidated profit for the September 2026 quarter was Rs 438 crore, against Rs 419 crore in June 2026 and Rs 448 crore a year earlier.

The filing does not quantify how much of the Rs 80 crore provision was reflected in the September-quarter regulatory-income line. It does show that basic and diluted earnings per share, or EPS, not annualised, were Rs 6.23 in the first half of 2026-27, compared with Rs 4.63 without net regulatory income or expense.

In the September 2026 quarter, reported EPS was Rs 3.20, while EPS without net regulatory income or expense was Rs 2.58. The difference shows the reported earnings contribution from that line, although the filing does not assign the regulatory income to individual tariff cases or balances.

How large are CESC’s regulatory deferral balances?

CESC reported regulatory deferral account balances of Rs 9,014 crore at 30 September 2026, up Rs 348 crore from Rs 8,666 crore at 31 March 2026. These balances are presented separately from current and non-current assets in the consolidated balance sheet and are linked to recovery assumptions over time.

The first-half cash-flow statement recorded a Rs 279 crore net change in regulatory deferral account balances, compared with Rs 305 crore in the six months ended 30 September 2025. Net cash flow from operating activities fell to Rs 1,384 crore from Rs 1,585 crore in the prior-year half.

CESC’s total consolidated assets rose to Rs 47,882 crore at 30 September 2026 from Rs 46,470 crore at 31 March 2026. Trade receivables increased to Rs 3,178 crore from Rs 2,416 crore, while cash and cash equivalents declined to Rs 2,764 crore from Rs 4,208 crore; the filing does not allocate the Rs 80 crore provision across the Rs 9,014 crore regulatory deferral balance.

What other tariff appeals affect CESC subsidiaries?

One CESC subsidiary has appeals relating to Uttar Pradesh tariff orders, although APTEL ruled in its favour on certain issues on 28 November 2025 and 11 May 2026. The Uttar Pradesh Electricity Regulatory Commission, or UPERC, gave effect to those judgments through an order dated 17 June 2026.

UPERC’s tariff order dated 2 July 2026 approved the annual revenue requirement, or ARR, for 2026-27 along with truing-up for 2024-25, and the subsidiary has appealed that order. Matters in appeals for 2019-20 to 2023-24 not covered by the 28 November 2025 APTEL judgment remain pending before APTEL.

Management said it believes the pending Uttar Pradesh appeals are more likely than not to be decided in the subsidiary’s favour, based on legal opinion and the earlier APTEL judgment. Any consequential adjustment will be recognised when the appeals are finally adjudicated, rather than before that point.

CESC also recouped from retained earnings an additional depreciation charge relating to fair-value increases in assets of Rs 93 crore for the six months ended 30 September 2026, compared with Rs 94 crore a year earlier. The company said changes to WBERC rules on Advance Against Depreciation from 1 April 2023 require the net depreciation charge to reflect tariff-regulation adjustments.

Conclusion

The Rs 80 crore provision narrows CESC’s reported exposure to certain old regulatory asset balances but does not resolve the wider tariff matters supporting regulatory income. First-half net regulatory income fell Rs 26 crore year on year to Rs 279 crore, while profit before regulatory income and tax rose Rs 77 crore to Rs 853 crore and consolidated profit was Rs 857 crore.

The next items to watch are the outcome of CESC’s APR and MYT appeals, the WBERC truing-up exercise for the subsidiary power-purchase order, and pending APTEL proceedings in Uttar Pradesh. CESC has said any required accounting adjustment will be made when these matters reach finality, while the WBERC order’s future truing-up impact remains unascertained.