Report of Indian Institute of Public Administration ... - Ministry of Power

Orissa
31 March 1999 BSES signed Shareholders Agreement and Share Acquisition Agreement.
1 April 1999 The management of the three companies was handed over to BSES.
1 September 1999 GRIDCO disinvested 51 per cent of its equity held in CESCO in favour of
the consortium led by M/s AES Corporation, USA, after obtaining
approval of the State Government. The management of CESCO handed
over to AES.
29 March 2004 A new public Limited company under the name and style “Orissa Power
Transmission Corporation Limited” (OPTCL) was incorporated to carry
on the business of transmission, STU and SLDC functions of GRIDCO.
31 March 2004 The new company obtained the Certificate for Commencement of
business, which entitles the company to carry on any business.
1 April 2005 OPTCL became functional. GRIDCO continue to carry on the bulk supply
and trading functions.
ASSUMPTIONS THAT WENT WRONG: HOW THESE AFFECTED GRIDCO
ADVERSELY
The Staff Appraisal Report (SAR) of April 1996 estimated the T&D losses in the State
at 39.5 per cent, which was to be brought down to 24.3 per cent by 1998-99.
Accordingly, the financial projection was made which estimated that GRIDCO would
break even during the financial year 1997-98. The real magnitude of the distribution
losses, which were about 50 per cent was not known at that time. Based on the SAR
and in the absence of reliable data based on the detailed studies, OERC in its First
Tariff Order (effective from 1 April 1997) directed that the losses be brought down to
35 per cent at the end of the year 1997-98. This was a very difficult target.
During November 1994, the final executive project summary prepared by the World
Bank had anticipated that while the assets and liabilities of OSEB would have to be
transferred to the new entities, not all liabilities could be transferred, as it would
burden the newly established Corporation with the same kind of liquidity crunch that
OSEB had faced. At that point of time, it was hoped that a restructuring loan on soft
terms would be available to GRIDCO to meet the urgent overdue liabilities to
suppliers and contractors, which did not materialise.
The SAR had assumed load growth of 11.4 per cent in 1997-98, 16.7 per cent in 1998-
99 and 9.2 per cent in 1999-2000 but in actual practice, it turned out to be
substantially less. The SAR did not anticipate the industrial recession in the last few
years, which led to a lower industrial load than, was projected. The preference for
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