BHUBANESWAR, May 2: In a sudden development, the Grid Corporation of Orissa Ltd (GRIDCO) has terminated the management contract signed with the private sector Bombay Suburban Electricity Supply Limited (BSES) for distribution of power, maintenance of the system and collection of electricity charges in three electrical circles in the state.

A GRIDCO release said that the contract, signed with BSES on September 13, 1996, had been terminated with effet from April 30 last. The reason for terminating the contract was that the incentive relating to the period October 1996 to March 1997 in the three circles of Bhubaneswar, Cuttack and Dhenkanal under BSES' charge had shown a negative figure.

This figure for the area under the charge of BSES became minus Rs 28 crore for the period for which the contract terminated, GRIDCO sources said.

Pointing out that the signing of the contract over seven months ago was hailed as the first significant step towards privatisation of distribution as part of the ongoing reforms process in the power sector in Orissa, the sources said it had been made possible by the Orissa Electricity Reform Act, 1995. However, there was a significant shortcoming in the arrangement that it cast no contractually enforceable obligation on BSES while GRIDCO was required to make payments on regular basis to the Mumbai company, the sources said.

BSES officials were not immediately available for their reaction. The sources said that during September 1996 and March 1997, Gridco had paid a management contract fee of about Rs 2.10 crore to BSES while another Rs 5.25 crore was paid to BSES in cash towards repair and maintenance expenditure besides stores worth Rs 3.50 crore. ``The arrangement drew a lot of flak from the press as well as various service associations as one-sided,'' the sources said.

The contract, however, had one clause which enabled GRIDCO to terminate it. The clause entailed that the contract would be cancelled provided the incentives relating to the period October 1996 to March 1997 showed a negative figure. GRIDCO sources said the spate of power failures for long periods due to ``technical reasons'' recently had also contributed to the termination of the contract.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.