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Centre propoes norms for discom sale

Buyer will get company with clean balance sheet free of accumulated losses and unserviceable liabilities
Discom land to be given to buyer on right to use basis on nominal charge

Our Special Correspondent   |   New Delhi   |   Published 24.09.20, 03:38 AM

The Centre has proposed bidding guidelines for the privatisation of power distribution companies (discoms) that can be used by the states. The objective of the guidelines is to reduce the mounting losses at the discoms.

According to the draft, the highest bidder “shall be provided with a clean balance sheet, free of accumulated losses/unserviceable liabilities” of the discoms. It also proposed that existing assets of the distribution licensee, other than land, would be transferred to the highest bidder according to rates set by  state power regulators.

Land owned by the discoms shall be provided to the new owner on a right to use basis at nominal charges, the document stated. The provisions enlisted “are essentially being presented with an aim of initiating discussions and soliciting inputs from stakeholders on the standard bidding document  (SBD),” the power ministry said.

The document said significant loss-making power distribution companies with medium to high aggregate technical & commercial losses (AT&C) of above 15 per cent may be bid out on AT&C loss reduction commitment for the first five years. 

The fixed parameter will be the consideration for sale of equity shares in the successor entity.

A second bid parameter has been proposed in case of discoms with lower than 15 per cent AT&C Losses (or with negligible ACS-ARR gap). The guidelines suggest the bid parameter may be upfront premium for equity consideration in the distribution company. A fixed AT&C loss trajectory for the next five years may be specified in the request for proposals (RFP) which shall be adopted for tariff determination.The power purchase agreements (PPA) of existing distribution licensees shall be transferred to successor entities. 

“Only in specific cases where there is a significant gap between Average Revenue Realized and Average Cost of Supply, PPAs may be retained in a State or Union Territory (UT) Government entity to structure a subsidised bulk power purchase cost for the successor entity for making it an independently financially viable entity, for a specified period,” the documents proposed.

The successor entity shall be provided with a clean balance sheet free of accumulated losses or unserviceable liabilities, the document said. 

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