Delhi cabinet notification on DVB privatisation likely in a fortnight

Anindita Dey

Mumbai, Oct 8: The state cabinet of Delhi is understood to have approved the privatisation programme of Delhi Vidyut Board (DVP), in line with the recommendations of SBI Capital Markets. According to sources, while a decision has already been taken, the notification, yet to come in the form of an ordinance to the Delhi Reform Act, is expected within a fortnight.

Banking sources add that most of the corporates which had put in their expression of interest for the proposed privatisation process have been shortlisted for final bidding. These corporates included Tata Power, Reliance Power, China Light and Power, CESC and AES among others.

As per the proposal, the privatisation will be done on the basis of efficiency-based bidding. As per the proposal made by SBI Caps, a new holding company, Delhi Power Supply Company, would be formed to park accumulated losses of DVP in the first three years of operation, post-privatisation. This model, designed by SBI Caps, will be used for the first time by DVP for its privatisation process.

The company will carry forward the losses incurred during the first three years of operation in the newly formed three power distribution companies, wherein 51 per cent will be held by the private parties and 49 per cent will be managed by the government. Both power generation and transmission will be managed by the government.

In order to make up for the losses in the initial years of operation, the government had decided to extend financial help to the tune of Rs 2,700 crore in the form of a subordinated loan to be arranged by the Power Finance Corporation on its behalf. This subordinated loan forms 30 per cent of the total funds required for the operation and the rest will be managed by the equity put in by private parties.

As per the proposal, sources added that the government will be in a position to avoid losses of around Rs 5,400 crore in a period of three years, calculated at the rate of Rs 3 crore per day in power distribution.


While avoiding losses, the government can use a Rs 2,700-crore subordinate loan to tide over the restructuring phase. The company has been valued in the range of Rs 3,500-4,000 crore for the proposed privatisation process on the basis of the future revenue
generating potential of the company, and not on the basis of its book value. This valuation captures both the loan and equity of the company.