World Bank Questions Gridco Move To Scrap Bses Contract With Bses

The World Bank, which has sponsored the Orissa power sector reforms, has taken an exception to the termination of Grid Corporation of Orissas (Gridco) contract with Bombay Suburban Electricity Supply Corporation (BSES) for distributing electricity in three circles of the state.

The Bank yesterday sought an explanation from Gridco for cancellation of the contract.

While sanctioning a $350 million soft loan for the states power sector reforms, the Bank had set a condition that the distribution system in the state should be privatised completely. Subsequently, Gridco divided the states power distribution system into four zones and decided to privatise them by 2000. The central zone, consisting of Cuttack, Bhubaneswar and Dhenkanal circles, was first to get off the block when Gridco entered into a distribution agreement with BSES in September 13 last year.

However, BSES officials were hopeful of the agreements revival after a meeting with Chief Minister J B Patnaik yesterday. We are keeping all our options open to revive the agreement, said Rama Rao, BSES chief engineer for Orissa operations. The options included a fresh round of negotiations with the state-owned utility company. Stating that the contract had the provision of a review within eight months of its being signed, Rao said that though his company had approached Gridco for such a review, the state firm unilaterally cancelled the deed without even responding to their request.

He described Gridcos move as abrupt and arbitrary. Seven months is too short a time to judge our performance in a three-year agreement and to cap it, no notice was served to point out our mistakes before the termination, Rao added. Gridco sources, however, pointed out that a significant shortcoming of the agreement was that there was no contractually enforceable obligation on BSES to improve its performance while Gridco was required to make regular payments of management contract fee to the Mumbai firm.

Between September 1996 and March 1997, Gridco paid Rs 2.1 crore to BSES as management contract fee. This apart, the Mumbai company was paid Rs 525 crore towards repair and maintenance and another Rs 35 crore worth of material.