New Delhi: The Ministry of Power has released a draft of the standard bidding documents required for the privatisation of discoms across the country which proposes acquisition of discoms, without the baggage of their accumulated losses or unserviceable liabilities, by private players. The draft has also detailed the transaction structure and the process for the same. In a note released on Tuesday, the ministry said, "The Ministry of Power is pleased to issue the Standard Bidding Documents (SBD) for encouraging and supporting acceleration of Private Sector Participation (PSP) in power distribution utilities across the country."
The news is significant because discoms across the country have been under severe financial stress, with large outstanding dues to Central PSUs, independent power producers (IPPs) and renewable power companies. The total overdue amount owed by discoms stood at Rs 1,17,310 crore at the end of July, official data showed. In order to improve the efficiency of discoms and the overall financial health, the government has decided to go for privatisation of discoms in Union Territories at first. The Centre plans to complete the process by January 2021.
Elaborating on the transaction structure, the draft document said, "The successor entity shall be provided with a clean balance sheet free of accumulated losses/ unserviceable liabilities." Additionally, the draft makes provision for suitable transition support to the successor entity, wherever required, by the concerned state/UT government for a specified period of five or seven years. The PPAs of the existing distribution licensees shall be transferred to the successor entities. "Only in specific cases where there is a significant gap between ARR and ACOS, PPAs may be retained in a state/ 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," said the document.
The Ministry of Power has proposed the formation of two committees in the draft, one of which will be mandated to review the process, while the other would evaluate bids. The empowered committee will be a joint panel of representatives from the concerned state government or the UT and Central government representatives. This committee will be chaired by the Chief Secretary (in states) or Advisor to Administrator (in UTs) and will consist of Finance Secretary and Power/Energy Secretary as Members and other Members appointed by the state government or the UT. The empowered committee will be responsible for reviewing the entire process and for timely concurrence on transfer scheme, bid documents/ changes to SBD, bid outcomes and various other decision points forming part of the process, said the document.
In addition, the state/ UT governments will also be required to create a Technical Evaluation Committee for evaluation of bids received. Further, a nodal officer will be required to manage bid process including acting as a point of contact for the bidders, issuance of documents/ clarifications and receipt of bids, said the Power Ministry.
Review of existing structure and decision on need for creation of SPV or a new legal entity which may emerge as the successor entity and in which the selected bidder will acquire equity shares will be carried out at pre-transaction stage. "In states/ UTs, where existing distribution licensee is a government department, an SPV may be incorporated for taking over the distribution licensee function. In states/ UTs where corporatisation has already happened, and there is no proposal for further area configuration, selected investor may be offered equity shareholding in the existing legal entity itself," said the document.
"Employees of the existing distribution licensee shall be transferred to the successor entity. Such transfer of employees shall be at continued or better service conditions. Further, the concerned state/ UT government shall responsible for all terminal liability obligations of such employees till their transfer date. The successor entity shall fund necessary contributions towards terminal liabilities on a prospective basis from the date of their transfer," said the document.
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