The Hindu : Karnataka News : Power supply in Bangalore to be privatised?

Online edition of India's National Newspaper
Monday, Apr 26, 2004

Karnataka

Karnataka

Power supply in Bangalore to be privatised?

By Divya Sreedharan

BANGALORE, APRIL 25. Are there moves to privatise power supply in Bangalore city? According to sources, a big power company "has been lobbying hard" for the contract.

The sources said if this happened, it would be a change in the official policy that was initially about privatising urban sectors along with the rural areas. According to them, global tenders will be called for privatising power supply in Bangalore after a new Government assumes office.

While sources in the Government confirmed that big names — Reliance and the National Thermal Power Corporation — were in the fray, they maintained: "We have made it clear to the investors that they have to take up one underperforming area too."

Sources said the process would take some time. "It was supposed to be over by March 2004, but has been extended to 2004 end or the beginning of 2005," they said. But those within the power sector felt the matter needed to be publicly debated. They also feared that Bangalore would be sold "too cheap."

They pointed out that Bangalore was part of the Bangalore Electricity Supply Company (BESCOM), the most lucrative of the four electricity supply companies (ESCOMs). BESCOM at present yielded Rs. 200 crore every month in revenues, they said

When the official consultants (for privatisation) came up with a distribution margin (DM) method of privatisation in 2002, they held that only Bangalore would be attractive to investors. At the time the Government said rural sectors had to be included too.

But even the changed DM policy paper had made it clear that the ESCOMs could face "disaggregation" (breaking up into smaller entities) "if they do not attract suitable levels of interest."

As per the DM method, a private investor can pick up a 51 per cent stake in any ESCOM. Those in the industry said this put the sector at undue risk. "Bangalore power supply for instance, has been valued too cheap," they said. Sources disagreed.

"We have asked the consultants to come up with a mix of DM and a management contract. We will do what is best for the consumer and brings the best returns to the Government," they added.

But industry sources said there was another issue to be resolved: that of the employees' — both engineers and other cadres — status.

"This has to be settled before any ESCOM can be sold," sources added.

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