Patna: The South Bihar Power Distribution Company Limited has decided to terminate the franchise given for power distribution work in Bhagalpur over non-fulfilment of certain contract clauses.

SPML Infra Limited had been given the power distribution franchise for Bhagalpur town and peripheral areas vide a deal inked in April 2014.

South Bihar Power Distribution Company Limited chairman-cum-managing director Pratyaya Amrit said the firm would take over power distribution work in Bhagalpur within a week. "The transition of power distribution work in Bhagalpur area would be smooth and all necessary preparations are being done for this," the CMD told The Telegraph.

Amrit said every contract consists of many conditions and as the Bhagalpur franchise had not been able to honour many of these conditions, it was decided to start the termination process, which has now been finalised.

Notices had been served on the franchise earlier and a hearing was conducted to hear out both parties to the contract. After that all legal formalities were completed before arriving at the decision to terminate the contract. Power company sources said the model was not healthy. According to an assessment by state power companies, customers were not satisfied with the services and the revenue was less than what it would have been in the hands of state-owned companies.

Also, some jurisdiction issues were coming in the way of rural electrification work in six villages in Bhagalpur. Under the franchisee model, state power companies provide power to the franchise company, which manages distribution. The franchise company is supposed to do all distribution work, oversee maintenance of lines, attend to fuse calls and collect bills.

The power company charges the franchise as per fixed rates that are subject to revision every year.

The revenue generated at the place where the franchise is working goes to the company and state power companies have nothing to do with it. As far as functioning of franchise system in Muzaffarpur and Gaya was concerned, the BSPHCL CMD said there were no major issues there so the the system would continue there for now.

While delivering a speech at a function organised by BSPHCL in May, chief minister Nitish Kumar had aired his reservations about the franchise model. He had clearly stated that the state government stood for doing away with the system.