The Hindu : WB team to confer with Energy Dept. officials

Online edition of India's National Newspaper
Thursday, Oct 10, 2002

Southern States

Southern States - Karnataka

WB team to confer with Energy Dept. officials

By Divya Sreedharan

BANGALORE Oct. 9. A World Bank team is meeting with Energy Department officials on Thursday to discuss power sector privatisation.

The team will be here for two days, but the Karnataka Electricity Regulatory Commission (KERC) is not involved in it. In fact, the KERC Secretary, Sridharan, told The Hindu that he was not aware of the visit at all. Besides, the KERC Chairman, Philipose Mathai, is on tour.

Among other things, the one topic sure to come up (at the meet) is the distribution margin (DM) concept for privatising the power sector. This strategy is the brainchild of CMS Cameron McKenna, Rothschild and Deloitte, consultants to the Government on Financial and Distribution Privatisation (FDP).

According to the agenda note for the 14th steering committee meeting held here on October 1, the strategy has been cleared, in principle, by the Finance Department and sent to the Cabinet.

The note says that "... the actual privatisation transaction would be cleared by the Finance Department only after scrutiny of detailed figures relating to DM financial analysis of risk allocation, contract license ... to be developed by the consultants to the satisfaction of the Finance Department".

According to sources, the Government is contemplating promulgation of an Ordinance to put the DM concept in place. This is because the Karnataka Electricity Reform (KER) Act 1999 does not have any provision for it. As per the law, an Ordinance must be signed by the Governor and within six months, passed by the Legislature or the Assembly.

For long, however, the KERC and the Karnataka Electricity Board Engineers' Association, and power sector experts have urged that the DM strategy should be publicly debated.

Ironically, the Government's silence on DM contrasts with the recommendations of its consultants for Social Assessment, the Centre for Management and Social Research (CMSR), Hyderabad. CMSR's Social Development Action Plan says: "... the current reform process has the responsibility to educate and bring in right awareness among the consumers and public on power sector issues and the meaning of current reforms".

This recommendation was also discussed at the steering committee meeting on October 1.

There have been frequent visits of World Bank officials to the State. Last month, a Power Sector Mission team was here from September 9 to 13 and met with the Bangalore, Mangalore, and Hubli electricity supply companies. They stressed that these companies needed better co-ordination and action plans for independent functioning.

Also, during the visit, the World Bank team recommended that the Government extend the services of PriceWaterhouse Coopers — the consultants for Institutional Strengthening and Power Market Development — to technical assistance for the four electricity supply companies.

It remains to be seen what this visit of the World Bank team will bring about.

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