The Gujarat government has decided to drop a plan to merge four state-run power distribution companies. Addressing the media, state energy minister Saurabh Patel said the idea was dropped after Prime Minister Narendra Modi and Union finance minister Arun Jaitley resolved the issues of income tax law provisions, which had been the reason behind the proposed merger.
The four companies are Dakshin Gujarat Vij Company (DGVCL), Madhya Gujarat Vij Company (MGVCL), Uttar Gujarat Vij Company (UGVCL) and Paschim Gujarat Vij Company (PGVCL). The merger was initially proposed after the distribution firms faced issues of load management and maintaining uniform tariff. Operational issues had cropped up in the implementation of availability-based tariff, which brought about financial obligations due to one firm under-drawing power while another was over-drawing.
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The merger also provided a solution to huge tax liabilities of transactions between the holding company Gujarat Urja Vikas Nigam (GUVNL) and the distribution companies. GUVNL came into being in 2005 when the Gujarat Electricity Board was unbundled into separate entities under the Electricity Act of 2003.
The restructuring was aimed at improving efficiency in management and delivery of services to consumers. The proposed merger had also sought to do away with disparities in the profit and loss of the individual companies under the state energy department.
While some of the companies were making huge profits, others continued to struggle. The merger had intended to rationalise the outcome of these companies, by allowing the profit-making companies to cover the losses made by the others.
It was also expected to bring down the maintenance cost and expenses of the different power-sector companies.