Tata Power distribution franchisee model on hold

The Maharashtra government's decision against privatising the Maharashtra State Electricity Board (MSEB) has dealt a severe blow to Tata Power Company's plan to introduce a franchisee model for privatisation of power distribution. The proposal has now been put on the backburner.

The impending state assembly elections and the strong protest by the MSEB trade unions prompted the state government to take such a decision.

The state government feels that under these conditions it does not make sense to go ahead with the privatisation of MSEB and has obtained a six month extension from the Centre for unbundling the board.

"At present, the state government policy is against privatisation. At this point, any proposal which has privatisation in-built in it will be inconsistent with present government's policy," MSEB chairman Jayant Kawale said.

"We have suggested many models for implementing the franchisee system. All these have now been put into cold storage following the state government's decision against privatisation," Tata Power sources said.

Tata Power had proposed to the state government a painless transition towards privatising power distribution through the franchisee route.

In the first step, this entailed taking over the operations and maintenance of the electricity distribution network in a particular area for a fee by Tata Power which would continue to buy power from MSEB.

The power would then be sold to customers directly at a tariff fixed by the state power regulator, the Maharashtra Electricity Regulatory Commission.

The Tata Power formula involves the company investing in the distribution infrastructure in the area under its management and further paring transmission and distribution losses.

Over a period of time "" say, five to seven years "" the assets in the entire area will revert to Tata Power. The consideration for this transfer of assets will be factored in to the tariff MSEB will charge for supplying power to the company.

The proposals also promised to protect the interests of MSEB employees.