Gridco, Bses Row May Short-Circuit Orissa Power Reforms

The termination of the energy distribution management contract between Grid Corporation of Orissa (Gridco) and Bombay Suburban Electricity Supply (BSES) Corporation may threaten the power reforms programme in the state.

The World Bank, the main sponsor of the power sector reforms, has taken exception to the scrapping of the contract by Gridco. The bank has sought an explanation from the state government owned firm for the decision.

The World Bank has been advocating complete privatisation of the states power distribution network to facilitate the massive capital flows required for system improvement and to cut down transmission and distribution losses, which currently hover around 47 per cent.

In fact, the bank had set a pre-condition that at least one of the four electrical zones in the state should be privatised before releasing the first tranche of the promised $350 million assistance to the state. The bank had set the year 2000 as the deadline for privatisation of the states entire network.

Accordingly, Gridco had offered the central zone for privatisation on an experimental basis and entered into a distribution operation agreement with BSES in September 1996 before availing the first tranche of the World Bank loan two months later.

The abrupt snapping of the seven-month old agreement has sparked off speculation about the future of the power reforms project and the banks role.

We are keeping all our options open to revive the agreement, said Rama Rao, Chief Engineer, BSES, Orissa operation. According to sources, the options include a fresh round of negotiations with Gridco to iron out differences over certain controversial terms.

However, Rao stoutly defended his companys position, saying that Bombay Suburban Electricity Supply had approached Gridco for the review of the contract which was due within eight months of its signing. But the latter unilaterally cancelled the deed without responding to the request.

Describing the action as abrupt and arbitrary, Rao said: Seven months is too short a time to judge our performance in a three-year agreement. To cap it, no notice was served on us pointing out our mistakes prior to the termination of the contract.

Gridco has cited a shortfall of Rs 28 crore in revenue collection against the figure targeted in the agreement as one of the reasons for snapping the contract. The dip in revenue collection in the zone occurred even as it showed an upward trend in all the other circles in the state. This was enough to cancel the agreement, said a Gridco source.

Rama Rao responded that although revenue collection had fallen short of the target, in absolute terms it rose from Rs 127 crore in the second half of 1995-96 to Rs 153 crore in the corresponding period last year. However, Gridco sources argue that this increase occurred because of a 17 percent tariff increase during the period rather than because of any operational efficiency on the part of BSES.

Responding to charges that BSES was unable to control wrong billing which led to piling up of consumer complaints and frequent disruption in power supply despite the state witnessing surplus generation, the Bombay Suburban Electricity Supply official pointed out that his companys role in system environment and streamlining of the billing process was restricted to that of a management consultant, not a full-scale distributor.

Rao argued that while Bombay Suburban Electricity Supply played only a supervisory role, most of the work at the ground level was being done by the Gridco staff, over whom BSES did not have any administrative control.

Meanwhile, the Gridco board has also terminated its agreement with leading advertising firm Hindustan Thompson Associates (HTA) for the latters alleged failure to create adequate public awareness about the on-going power reforms process. Gridcos account with HTA was worth nearly Rs 2 crore over four years.