An unfair deal

THE Orissa Power Generation Corporation (OPGC), which established the first two power generation units in Ib Valley, had originally planned to construct two more units there. It submitted a project report to the Central Electricity Authority (CEA) and obtained the necessary clearances, including the environmental clearance from the Union Ministry of Environment and Forests. Then the World Bank reform loan came along. The World Bank insisted that the OPGC should not establish any more power generation projects, and that only independent power producers (IPPs) should do so. Since the OPGC also found it difficult to raise the necessary resources, it was decided to award the third and fourth units to an IPP. A power purchasing agreement was negotiated with AES Transpower, an United States company, and all the clearances obtained by the OPGC for the construction of Units 3 and 4 were assigned to AES.

In 1995, AES Transpower decided to establish two 250 MW units instead of 210 MW plants as originally planned. This meant that equipment would not be supplied automatically by BHEL, but would be purchased through a global tender. It also meant that the infrastructure (land, water, coal-handling and so on) meant for the first four units of Ib valley could not be shared. New infrastructure catering to higher capacity had to be built. Then it was decided that the OPGC would construct Units 3 and 4 while AES would be given Units 5 and 6.

Although it is two years since this decision was taken, AES has refused to reassign the clearances to the OPGC. OPGC Managing Director B. Garnaik told Frontline that AES now maintains that it would reassign the clearances to the OPGC only when AES gets all the necessary clearances for Units 5 and 6, a position that is considered unreasonable and unjustified.

The World Bank has mandated the phased privatisation of the OPGC, although the OPGC will not benefit at all from the $350 million reform loan. Twenty-six per cent of the OPGC's Rs.450-crore equity is being disinvested in the first tranche. The bid document is ready. The OPGC hopes to get Rs.120 crores by way of premium on the disinvested shares. In the second tranche, due in 1998-99, another 23 per cent will be off-loaded, paving the way for private management control.