Delhi Cabinet Rejects DVB Bids

The Delhi Cabinet today rejected the bids put in by BSES, Tata Power and Reliance Power for Delhi Vidyut Board's (DVB) three distribution companies in their present form. It is constituting a core committee to explore possible options for salvaging the bidding process.

"The Cabinet unanimously rejected the bids in their present form and entrusted the core committee of secretaries with exploring options, including negotiations with the bidders," an official said.

The committee will comprise DVB chairman Jagdish Sagar, principal secretary (power) Ramesh Chandra and secretary (planning) Rahul Khullar. No time-frame had been set by the Cabinet for the panel to announce its decision, officials said.

The committee was expected to start negotiations with the bidders shortly. Tata Power and BSES have bid for 51 per cent stake in the North-North West Delhi Distribution Company and the South-West Delhi Electricity Distribution Company. Reliance Power has put in the lone bid for a controlling stake in the Central-East Delhi Electricity Distribution Company.

All three proposed an average aggregate loss reduction of just 12-14 per cent for Delhi Vidyut Board's distribution arms over the next five years, as against the 20 per cent target set by the state administration. In addition, the bidders had also put forth some unacceptable riders in their bids, an official said.

As per the divestment model for DVB's three distribution companies, bidding is to be carried out on the extent of losses proposed to be lowered annually for each distribution company over the next five years, while the 51 per cent government stake in the three companies is to be given away to the winning bidder at face value.

Officials said the private players had suggested lowering losses by just 0.5 per cent in the first year. "Under government control, DVB managed to lower losses by 2 per cent last year. If the private players are not capable of achieving as much, there is no point in privatisation," an official said.

The private players, however, justified their bids by stating that the opening levels of aggregate and technical losses proposed by the government were more realistic, which were consequently pruned by the regulator in its order. The lowering of the base loss figure made the task of achieving a 20 per cent loss reduction even tougher, they claimed.

Moreover, the disincentive clause prescribing a penalty in case of underachievement of loss reduction targets had led them to bid conservatively, the bidders said.