Infrastructure

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Power company controversy after Orissa cyclone

15 December 1999


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A major beneficiary of World Bank-backed power sector reforms in India is US-based multinational company AES. In September AES acquired an electricity distribution network in Orissa state under the Bank-advised and -funded unbundling and privatisation programme. In November, after the cyclone had devastated large areas of Orissa, including AES‘s zone, the company’s Chief Executive, Mr Bakke stated that his company could only provide $1 million for cyclone damage repair, demanding that the government foot the rest of the $60 million bill. He explained that AES did not have insurance cover and that their contract states that such costs can be passed onto consumers. It is estimated that electricity tariffs would have to be raised three times to cover this bill. Bakke claimed:

“it is now up to the government to find a way out on the restoration cost financing. There are various means for this financing … there are three loans to this distribution company [including one from the World Bank], which can be stretched or some additional financing can be made available by either the government or the World Bank.”

In mid-November K. Ashok Rao, Convenor of the National Working Group on Power, India released an angry joint statement saying that:

“There is no case for such a compensation and/or tariff increase. Losses and profits are part of a business cycle and AES cannot claim that the Governments of India or Orissa or their people have an obligation to ensure AES a risk-free business”.

He also pointed out that the state run Department of Telecom announced concessions to consumers. The Working Group is requesting information about laws in Europe and USA about privatised utilities in similar situations.

Contact: K. Ashok Rao,

theraos@vsnl.com.

For information about AES involvement in the controversial Bujagali Falls dam in Uganda, see World Rivers Review, December 1999, or contact Lori Pottinger, IRN

For general information on controversial privatisation and concession agreements, see the Public Services International Research Unit web site: www.psiru.org.