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KESCO invites fresh bids for distribution business

Dinesh Narayanan

MUMBAI, May 20

KANPUR Electricity Supply Company Ltd (KESCO) has extended its privatisation time-frame for the eleventh time hoping to find an eligible suitor, `preferably' foreign.

KESCO had invited tenders for privatisation of distribution sometime in May last year. Reliance Power, Tata Electric, BSES, and Calcutta Electric Supply Company had bid for it.

However, due to `regulatory and tariff uncertainties' the process kept getting delayed and now the company has called for fresh bids.

The bone of contention in the circle was the bulk tariffs, which the State electricity board (SEB) was reluctant to give up. A couple of large industries such as the public sector ordnance factory contributed a large chunk to the bulk tariffs. Private op erators felt without the bulk customers, it would be unviable to take up the business.

With the Uttar Pradesh Electricity Regulatory Commission ``doing a good job'', according to one bidder, this time the programme is expected to take off smoothly. Entities which were shortlisted in the prequalification stage need not present fresh bids.

According to merchant banking sources, several foreign companies, including China Light and Power, AES, EDF of France and Malda of Spain, are keen on participating. They say these companies are viewing it as an ideal opportunity to test the waters in the distribution sector in the country. The cost of acquiring the distribution business would be around Rs 400 crore.

They also said an engineers' body is also keen on participating in the process.

The circle is relatively a small one spread over 750 sq.km. with about 3.5 lakh customers. The sources said about 60 per cent of the revenues come from industrial consumers and the rest mainly from households. There are several large industries in the re gion.

The Delhi Vidyut Board privatisation scheme too had attracted a couple of foreign companies.

If these schemes take off smoothly, they could be lend some credibility to the privatisation and reform initiative in the power sector. The generation business is in trouble with most of the foreign entities that had entered the country pulling out, an a nalyst said.

One of the major reasons cited for the failure of these projects was the transmission and distribution set-ups remaining with public sector entities. The lax collection systems of SEBs pitched hurdles in establishing payment security mechanisms, the anal yst said.