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| May 9, 2005 | Monday | Rabi-ul-Awwal 29, 1426 |
Power rationing during peak hours: Mumbai Letter
ONE of the major reasons why Maharashtra emerged as the industrial powerhouse of India was the excellent power situation in the state. Private power producers, including the Tatas, were not only generating power and transmitting it across the state, but Maharashtra had also licensed private distributors, who ensured uninterrupted electricity to millions of consumers in Mumbai, the state capital.
So far as power supply to India’s financial capital was concerned, there was no monopoly producer or distributor (as in most other Indian cities), ensuring an efficient network. Even today, Mumbai is perhaps the only city in India where there are virtually no power cuts, and consumers do not have to invest in expensive back-up systems.
But the achievements of the past over half a century in the power sector in Maharashtra have gradually been destroyed by successive governments in the last 10 years. Last week saw the culmination of these ‘efforts,’ leading to a virtual breakdown in the law and order situation in several cities across the state.
Maharashtra has been facing a massive 4,000 MW shortage of power during the peak hours, forcing the government to impose four-hour daily cuts in urban areas (except Mumbai), and 12 to 16 hour cuts in the rural areas.
Exploiting the situation, the Shiv Sena galvanised thousands of protestors, who attacked offices of the state-owned power monopoly, the Maharashtra State Electricity Board (MSEB), in cities like Pune, Nagpur, and Kalyan, an industrial hub on the outskirts of Mumbai.
A worried state government began a desperate search for electricity, with chief minister Vilasrao Deshmukh pleading with neighbouring states to sell additional power to Maharashtra. Deshmukh also rushed to Delhi, seeking the help of the federal government. Ten years ago, Maharashtra was a power-surplus state, exporting electricity to other states.
Today, it has been reduced to begging for electricity from other states, thanks to the foolish policies pursued by the government. Last year, around the time of the state elections, a Congress chief minister - prodded by the Shiv Sena - promised to give free electricity to farmers, despite the failure of such a policy in several Indian states.
The MSEB, which is strapped for cash, has not been investing in power generating units, as politicians have been forcing it to provide subsidised electricity to various pampered segments. The state energy regulator warned the government not to pass on the burden of free electricity to farmers to the MSEB. But the government itself is neck-deep in debt, having run up a whopping Rs1 trillion in loans. The government is now trying to extricate itself from the mess, and the free power policy is unlikely to be continued for long.
And the government has also had to swallow its bizarre claims of being power-surplus, a claim it made while scrapping the controversial, multi-billion-dollar Enron-promoted power project. Today, politicians are desperately trying to revive this project, even as Indian financial institutions have had to take a major hit.
Though Deshmukh claims to have signed memorandums of understanding to generate an additional 10,000 MW of power over the next five years, most independent power producers are reluctant to risk investing in the state, especially after the shabby manner in which the government treated investors in the Enron-promoted project.
WAY back in the 1970s, when Mumbai had barely two or three 5-star hotels boasting of international ambience and standards, the government in its wisdom decided to expand its presence in the business of running luxury hotels. The government’s tourism ministry was already operating the prestigious Ashoka group of hotels, but it decided to saddle state-owned airline, Air India, with another subsidiary to run hotels.
Hotel Corporation of India, a subsidiary of the national flag-carrier, Air India, promoted a chain of hotels, called Centaur, two of which came up in Mumbai. Being owned by the government, the hotels got the choicest properties - one outside the domestic airport, and the other at the famous Juhu Beach.
But being government-owned properties, the luxury hotels began to go to seed, with service standards deteriorating by the day. Guests often complained of stinking carpets in rooms, rude room boys, and exorbitant tariffs. A couple of years ago, the National Democratic Alliance government decided to sell off the two Mumbai properties, as part of its privatisation drive.
The move was vociferously opposed by many parties, including the Shiv Sena (part of the NDA government), and the leftists. The Sena and the communists control several unions in the aviation and hotel industry, so their opposition to the privatisation move was but natural.
However, Arun Shourie, a former journalist, who joined the BJP and was made the Divestment Minister, went ahead and sold the government’s stake in the two Mumbai properties, despite stiff opposition from the Shiv Sena, which launched a scathing attack on him in Parliament, together with the leftists.
Now with the United Progressive Alliance government in power, allegations against the Centaur deal have resurfaced, triggering off another battle of words between supporters of the government and Shourie. Last week, Finance Minister P. Chidambaram, hinted that Shourie, as divestment minister, had taken an ‘active interest’ in the deal. The leftists have demanded a probe by the Central Bureau of Investigation into the episode.
An unfazed Shourie, however, has sought a comprehensive inquiry into the sale of Centaur properties, and says he is willing to face any enquiry. He has accused Chidambaram of ‘hand-picking’ a retired bureaucrat, while ignoring reports by three independent advisors.
The issue of divestment of government stake in public sector companies is a politically sensitive one and the present government - which is dependant on the leftists for its survival - has been soft-pedalling the entire matter. Even within the Congress there is significant opposition to the dilution of stake in state-owned firms. Considering the sensitivity (and volatility) of the issue, this is unlikely to be the last word on Centaur Hotels.
THE unsavoury Ambani family saga has finally landed up in the Prime Minister’s Office, with Mukesh Ambani, the group chairman, meeting Manmohan Singh, the Indian premier, last week.
Brothers Mukesh and Anil Ambani are involved in a no-hold’s barred fight for control of India’s largest private sector group, the Reliance empire, founded by their father, Dhirubhai. Differences between the two brothers surfaced after the death of their father, and have intensified in recent months.
Anil Ambani has been accusing top Reliance officials, seen to be close to his elder brother, of trying to oust him from the group. He has also charged the group - he continues to be number two in many of the companies - of corporate misgovernance. Last week, he dragged in cousin Nikhil Meswani into the controversy, levelling serious charges against him. These included violating insider trading regulations, and fraudulent trade practice regulation. Meswani accompanied Mukesh to Delhi, where they met the prime minister.
The fight between the two brothers has had a demoralising effect on senior executives in the group, though Reliance Industries - the flagship - continues with its record performance. For the fourth quarter ending March 31, the company’s profits rose by a whopping 62 per cent to $542 million, while sales shot up by 26 per cent. But investors have been wary of the Reliance scrip, worried over the continuing outbursts by the brothers Ambani.
In fact, on the day the board of Reliance Industries met, Anil Ambani openly castigated the other directors, claiming that it was a case of ‘Reliance XI versus Anil.’ The younger brother, who used to take on the role of briefing analysts and the media, has been relegated as an outsider.
Last week he publicly demanded that shareholders be rewarded with bonus shares and higher dividends, and complained that his suggestions were not being considered by the board. Many analysts have attributed the excellent quarterly figures to extraneous factors, including the soaring demand for oil, and the corresponding rise in oil prices.
The group has also diversified into telecommunications, and has emerged as one of the largest providers of both fixed line and mobile services. Reliance also has ambitious plans in the power sector, especially after its acquisition of BSES Ltd, a leading distributor of power in Mumbai and Delhi.
But the differences between the brothers has cast a lot of uncertainty on the group’s expansion plans. Both brothers are also being identified with political backers.
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