Grid Corporation of India (Gridco) proposes to set up four subsidiaries to take up power distribution work in four electrical zones in the state, following the termination of its power distribution management agreement with Bombay Suburban Electrical Supply Corporation (BSES) last week.
Gridcos decision has, however, has been criticised by the World Bank, the main sponsor of the power reforms programme in the state. The Bank, according to sources, has questioned the timing and the basis of Gridcos unilateral decision to end the contract. It had sanctioned $350 million dollar soft loan for revamping the states power sector, with a pre-condition that the entire distribution network in the state be privatised by 2000.
The corporation, in a move to diffuse tension with the World Bank, intends to corporatise the distribution network in the state, though the intended structural cast may fall short of the Banks suggestion for complete privatisation. A Gridco source said: We hope that the World Bank will approve of the plan as a compromise formula. Following our bitter experience with BSES, we do not want to go for wholesale privatisation right now. Instead, we would like to go for corporatisation of the distribution channel to improve performance.
Sources said, Gridco will act as the holding company for the four subsidiaries, which will be entrusted with adequate statutory authority to function independently. At the outset, it plans to approach promotional agencies like IPICOL for joint partnership in the project. Though there is no immediate plan to privatise these subsidiaries, private participation will be encouraged in the long run, it said.
Besides, a part of the equity in the subsidiaries will be offered to the local industries operating within the respective zones and outside, though Gridco would prefer to continue as the majority stake holder for now, sources said.
Meanwhile, the row between Gridco and BSES has taken a turn for the worse with the latter rejecting the formers claim for payment of compensation following the termination of their contract.
Gridco had served a notice on BSES last Monday, asking for a refund of Rs 10 crore following the scrapping of the contract on April 30.
The claim included refund of Rs 5 crore paid to the company towards repair and maintenance expenses and over Rs 3 crore of store material entrusted to it. It has also demanded a Rs 2 crore compensation for below par performance by the Mumbai company.
BSES, however, has rejected the corporations claim. Its solicitors, Mulla and Mulla, are said to have sent a letter to Gridco, clarifying the companys position in this regard.
We do not accept the legality of the termination of the contract or the charges leveled against us in the letter communicating such a drastic action by Gridco. So where is the question of paying compensation, a top official at the BSES office here said,
Gridco has spurned all suggestions about a possible renegotiation of the contract.
Its spokesman said yesterdaythat the BSES request for reviving of the contract has been rejected by the authority.
Both sides, however, conceded that they are consulting legal experts to prepare for a long legal battle.
However, we hope that the current development would not affect the sanction of subsequent instalments of the bank loan for the reforms process in the state, the Gridco spokesman said.
