It's a small, though promising, beginning. On May 31, the Delhi government hawked a 51 per cent stake in three distribution companies of the Delhi Vidyut Board -- the state government-owned power company -- to BSES and Tata Power. On Monday July 1, the assets of these distribution companies are to be transferred. Whereas four zones are scheduled to be transferred to BSES, two will be handed over to Tata Power.
The 51 per cent stake in the three utilities was sold at face value. Both BSES and Tata Power are required to reduce losses over the next five years. Once the total losses are brought down to 30 per cent of the quantum of power supplied, from the present levels of around 55 per cent, the distribution business is expected to turn around. "From there on, the companies can expect to turn around and consumers can benefit in the form of lower tariffs," says Delhi's power secretary Ramesh Chandra.
DVB's privatisation is, in fact, part of a broader effort at unloading the Delhi government's three bleeding companies -- the Delhi Transport Corporation (DTC), the Delhi Jal Board (DJB) and DVB itself. The government is, however, reviewing its earlier plans of privatising the three companies involved in the liquor business -- the Delhi State Industrial Development Corporation, Delhi Tourism and Transport Development Corporation and Delhi State Civil Supplies Corporation. DTC, DJB and DVB account for a large chunk of increase in the Delhi government's outstanding debt of Rs 7,785.87 crore, as on March 31, 2002. The additional non-Plan liability on account of the three in 2001-2002 was Rs 1,350.52 crore -- Rs 804.18 crore for DVB, Rs 164.35 crore for DTC and Rs 381.99 crore for DJB.
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DTC and DJB are yet to be privatised. But the government has initiated the process of restructuring them, with the eventual goal of selling them.
The government has commissioned a World Bank-funded study aimed at restructuring DJB. Consulting firms PricewaterhouseCoopers and Tata Consultancy Services have been roped in for this and their reports are expected to be tabled before the state Cabinet over the next couple of months.
DJB chairman P K Tripathi is a firm believer in increasing the tariff on water, which is among the lowest in the country.
Some believe that a more urgent requirement is a regulatory agency to correct the present anomaly of the poor paying the most, as a proportion of their income, for water while the affluent pay a negligible tariff.
On DTC, the government set up a core committee of secretaries in May this year to look at the possibility of restructuring (and eventually privatising) DTC. But if the past is any guide, not much is expected of the latest initiative.
The government has announced several times that it will privatise DTC. Last year, the government had also announced that it would divide the capital into six zones, with private transport companies running buses in each zone. The scheme evoked little response from private companies and so had to be dropped.
"The entire transport business in Delhi is totally fragmented. There are no rules and the State Transport Authority has proved to be an incompetent regulator. Consequently, the common has been on the receiving end of the bad services offered by both private and government operators," says Anshul Rai of consulting firm KPMG.
Yet few will disagree that the government's effort to sell DVB's distribution arms has worked. That's partly because of the manner in which it handled employees. First, it convinced the unions to sign a tripartite agreement that they would not stall privatisation if the service terms of workers were not altered post-privatisation. Secondly, it invoked the Essential Services Maintenance Act to prevent workers from embarking upon an agitation.
Some argue that privatisation only ensures that Delhi's electricity distribution business moves from being a public monopoly to a private monopoly. But others contend that it is a step in the right direction.
Says Rai: "The government has initiated a step towards tackling the key concern of inefficiency by roping in private players into the distribution business, which rightly comes as a priority to ushering in choices to consumers in selecting service providers. With a gradual improvement in the efficiency parameters, the introduction of competition in supply could be considered in the future."
But, Congress member Jairam Ramesh, who was part of a committee set up in 1999 to privatise DVB, says the reliability of power supply is a key yardstick to judge whether privatisation has worked -- and it's still far too early to arrive at any conclusion here.