Bank Asks Mseb To Split Into Three

The World Bank has asked for the Maharashtra State Electricity Board (MSEB) to be split into three companies before it can revoke suspension of the undisbursed part of its $350 million loan to the board.

The fresh condition, which did not figure in its earlier talks with the government on the subject, was raised at a meeting between Bank executives and Maharashtra government officials in Mumbai yesterday.

The Bank suggested that one of the companies should handle generation, the second distribution and the third transmission. This is a distinct change from the Banks earlier stance that the board be corporatised.

The meeting took place in the backdrop of US sanctions on India after it conducted five nuclear tests in Pokhran, Rajasthan, earlier this week. The US government is bound under its domestic law to oppose loans to India by the World Bank and the International Monetary Fund.

State government sources said the meeting did not discuss the fallout of the US sanctions . The sanctions did not come up at all, a senior state government official said.

Sources said the splitting of the state electricity board into three companies was a brand new suggestion from the World Bank. It was not proposed even by the Rajadhyaksha Committee, which, in its 1996 report, had recommended only that the board be corporatised.

The Bank has also reiterated three other conditions laid down previously, namely that of MSEB maintaining an intenral rate of return of 4.5 per cent, slashing receivables down to 75 days and rationalisation of the tariff structure.

Currently, MSEB has provided for receivables upto 107 days. State government officials said the receivables could be brought down to 75 days only by writing off a large portion of them as bad debts.

State government officials said this was emerging as the key issue during the negotiations. However, the Maharashtra government had not made up its mind on any of the issues so far. The World Bank team is scheduled to hold another round of dsicussions with the state chief secretary P Subramaniam on Monday. A final picture is likely to emerge only by mid-June.

The World Bank had suspended the undisbursed portion of the $350 million loan to MSEB in September, 1996.

At that time the state had drawn only $ 107 million of the loan. The state governmen t and MSEB have ben trying very hard since then to get the World Bank to revive its package.