No takers for Bihar government’s power distribution tender

Pratim Ranjan Bose, Kolkata. Sept. 4

There appear to be more stumbling blocks in improving Bihar's electricity distribution scenario than Chief Minister Nitish Kumar ever imagined.

Beginning 2010, the Kumar government has been trying to appoint a franchise distributor for capital Patna, albeit unsuccessfully. If the indications are right, the latest tender, floated earlier this year to attract major private sector players like CESC, Tata Power, Reliance, Torrent, may reach the same fate, courtesy the revenue aspiration of the government vis-à-vis the realities in Bihar.

The State Government wished to award the franchise to a major player operating in the metros. But prospective bidders thought otherwise.

"Despite repeated extension of the last date of submission of bids, the tender has not received a single bid so far," a State Government source told Business Line.

In a last ditch attempt to woo bidders, Bihar State Power (Holding) Company Ltd (BSPHCL) extended the last date for another couple of weeks till mid September.

But, sources in distribution companies suggest the effort is likely to go waste, unless the State either lowers the reserve price or bats for increasing the power tariff payable by consumers. The State utility reportedly expects the prospective franchisee to pay a minimum levelised tariff of Rs 4.13 a unit for power purchases (from BSPHCL). If weighed against the State's average billing of Rs 3.40 a unit for sourcing power from generation utilities, the reserve price is not way off the mark.

But the disrepute of Bihar made all the difference. Even in Patna, 35-40 per cent of electricity sales are unrealised. There is little concept of metering. Quality of power infrastructure is poor and requires heavy investments. Incidentally, sources say the State adopted a more flexible approach while awarding franchises in the smaller towns of Muzaffarpur, Gaya and Bhagalpur, where as much as 60 per cent of sales are unrealised. The contracts were recently awarded to Essel Adi Smart, DSPC (now renamed India Power) and SPML Infra, respectively.

According to India Power, which got the Gaya circle, the franchisee will buy power from the State utility at Rs 1.69 a unit and is eligible to recover Rs 5.32 a unit from the final consumer. The low input cost takes care of the revenue risk of the franchise.