RP-Sanjiv Goenka Group Company Set to Acquire Chandigarh DISCOM

Eminent Electricity Distribution Limited, a wholly-owned subsidiary of Calcutta Electricity Supply Corporation (CESC), has placed the highest bid of ₹8.71 billion (~$117.32 million) to acquire a 100% stake in Chandigarh’s power distribution company (DISCOM).

According to Mercom’s sources, in the competitive bidding process, Torrent Power, NTPC Limited, and ReNew Power had placed bids of ₹6.06 billion (~$81.61 million), ₹5.63 billion (~$75.82 million), and ₹5.51 billion (~$74.20 million), respectively. While the Adani Group, Tata Power, and Sterlite Power had quoted ₹4.71 billion (~$63.43 million), ₹4.26 billion (~$57.37 million), and ₹2.01 billion (~$27.07 million), respectively.

Incorporated in 1978, CESC is the flagship company of the RP-Sanjiv Goenka Group. The company into electricity generation and distribution. CESC is the sole distributor of electricity within an area of 567sq km of Kolkata and Howrah and serves 2.9 million consumers in the domestic, industrial, and commercial categories.

This announcement comes after another successful DISCOM privatization deal closed in January this year when Tata Power took over the management of Western Electricity Supply Company of Odisha and Southern Electricity Supply Company of Odisha.


Background

In November 2020, the Chandigarh Administration had issued a request for proposal, inviting bidders to acquire its DISCOM, following the Ministry of Finance’s proposal to privatize DISCOMs in the union territories of the country.

However, in December 2020, the High Court of Punjab and Haryana issued a stay order on the Central Government’s proposal to privatize Chandigarh’s DISCOM.

The UT Powermen Union Chandigarh had filed a petition with the High Court, calling the move ‘unjust and illegal’, as the DISCOM has been running in profits and saw surplus revenue for the last three years. The High Court, in its order, had stated that the matter required further deliberation and that it would be brought up for hearing within six months after the court resumes its normal functioning.

In January 2021, the Supreme Court lifted the stay order passed by the High Court of Punjab and Haryana on the privatization of Chandigarh’s DISCOM.

DISCOM privatization has not found favor among the DISCOM employees and authorities in many union territories.

In March 2021, the Bombay High Court suspended the auction for a 51% equity stake in DISCOM for the Union Territory of Dadra and Nagar Haveli and Daman and Diu. The High Court suspended the auction after public interest litigation was filed against the privatization of the DISCOM. Later in July, the Supreme Court lifted the suspension order imposed by the Bombay High Court.

Mercom had previously written about why privatizing struggling DISCOMs could help them out of their financial troubles and push the Indian power sector forward. DISCOMS are at the root of all the problems in the Indian energy sector. Due to their financial ineptitude, attracting investments into the sector has become incredibly challenging. Unless steps like privatization of DISCOMS are put on the table, chances of a turnaround in the energy sector are minimal.