The Union Cabinet has approved the formation of a special purpose vehicle (SPV) to privatize the electricity distribution business in the Union Territory (UT) of Dadra & Nagar Haveli and Daman & Diu (DNH&DD), and the sale of equity shares of the new company to the highest bidder.

A single distribution company, DNH-DD Power Distribution Corporation Limited, would be incorporated as a wholly-owned government company, and a trust would be created to manage the terminal benefits of the personnel transferred to the newly-formed company. The transfer of assets, liabilities, and personnel to the new company would be followed as per the Dadra and Nagar Haveli and Daman and Diu Electricity (Reorganization and Reforms) Transfer Scheme, 2020.

The Cabinet decision comes months after the Supreme Court lifted the stay imposed by the Bombay High Court on the DISCOM privatization process, according to the update provided to the Bombay Stock Exchange by Torrent Power.

The tendering process for a 51% equity share in the DISCOM for Dadra & Nagar Haveli and Daman and Diu was halted due to the court order. The High Court had suspended the auction after a public interest litigation was filed against the privatization. Torrent Power had emerged as the highest bidder for the 51% stake.

In December last year, Dadra & Nagar Haveli and Daman and Diu had invited bids to acquire a 51% stake in its DISCOM.

The privatization of the distribution business is expected to lead to better services to over 145,000 consumers of DNH&DD, operational improvements, and functional efficiencies in distribution. “This will further lead to an increase in competition and strengthen the electricity industry and will also lead to recovery of unrealized dues,” the government said.

In May 2020, the Government of India had announced ‘Atma Nirbhar Bharat’ campaign to make India self-reliant through structural reforms. One of the key measures planned was the reform of the power distribution and retail supply in union territories by leveraging private sector efficiency in electricity distribution.

In 2020, the government proposed privatizing DISCOMs in the UTs administered by the Union government. The respective state governments govern those in the states.