Nagpur News: Amidst the ongoing debate over allowing Foreign Direct Investment in the country, an American company has reportedly invested in the electricity distribution field in Nagpur. Sources revealed that the company named Bessemer has bought stake in SNDL, a company executing electricity distribution in three divisions across the city. Apart from this, a very nominal stake is owned by Spanco, which initially fetched the franchisee for the concerned work. With this development, Nagpur has now become the first city in the country where FDI has been infused in the field of power distribution.
It may be mentioned here that the apex body of electricity distribution Mahavitran had on May 1, 2011 awarded the franchisee for power distribution in Civil Lines, Gandhi Bagh and Mahal division to Spanco after inviting the tenders for the same. No sooner than the company was assigned franchisee, it became evident that it was facing severe financial crunch.
Spanco neither had the fund of infrastructural development nor it was having sufficient liquidity to pay the power dues to Mahavitran. It did not even open the escrow account deemed compulsory for depositing daily incomings to the Mahavitran’s account. When the matter was raised in the state assembly, Spanco hurriedly got the escrow account opened but could not comply with transfer of funds, taking the overdues to whopping Rs 300 crores. It was when Mahavitran issued notice to Spanco in this regard, that it proposed to partner Essel which later moved on to become the maximum stake holder in the new arrangment. After this a new company named SNDL was formed which took over the task from October 1.
At present, entire managerial rights are vested with Essel while the Spanco officials are gradually diminishing in size and strength. Sources revealed that as per new agreement okayed by Mahavitran, Essel holds 95 percent stake in SNDL while Spanco is just cornered with miniscule stake of 2 percent. Sources from Essel and Spanco informed that the new foreign stake holder Bessemer will have its share of 3 percent. It was told that Bessemer which was not quite happy with the functioning of the entity has invested about Rs 80 crore in Nagpur.
Meanwhile, a great deal of confusion prevailed over the concerned foreign investment. Speculations are rife whether Mahavitran has cleared the investment without approval from state goverment. No offiicial was however willing to comment over the matter, however they claimed the procedure was held under proper regulations.
Dipen Agrawal, President of Nag Vidarbha Chamber of Commerce said that any foreign investment which primarily focuses on infrastructural developments like electricity distribution, improvement of public transport and roads is always welcome. Such investments should be actually promoted, he said.
On the contrary, he said, FDI in retail should be strictly blocked as it would not serve any purpose but eventually cause the manufacturers, traders and farmers huge loss. He said, “We are not averse to FDI in infrastructure as it would help uplift the city but if we allow FDI in retail then it would put local players on the backfoot.”
Commenting on the increasing stakes of foreign investors in Indian companies, he said whereas foreign companies draw loans at marginal interest rate of 2%, the Indian companies have to bear the interest of 16.8% which initially loosen the scope for profit.
Honorary Secretary of Vidarbha Taxpayers’s Association Tejinder Singh Renu hailed the decision to allow FDI in electricity distribution, saying that such an stand which benefits the citizen of Nagpur is always welcome. He also raised hope that new company should use its expertise to reduce the transition losses in power supply, taking the benefit to the consumers. Even the practice of passing the buck on each other for irregularities in the system could be contained to the great extent with FDI, he added.