DVC bleeds as Bengal sits on NLC’s ₹5,500-cr takeover deal

The Mamata Banerjee government in West Bengal will hold its annual business summit later this week to protect the investors’ interest in the State.

But, the same government is blocking a nearly ₹5,500 crore takeover deal by Chennai-based NLC (formerly Neyveli Lignite Corporation) that could help bring the loss-making Kolkata-headquartered utility Damodar Valley Corporation (DVC) into black.

NLC is a central public sector unit (CPSU). DVC is a statutory organisation with nearly 7,700 MW generation capacity.

Held jointly by the Centre, Jharkhand and West Bengal, it was the largest investor in the State, along with SAIL, also a CPSU — in recent times. In February 2016, DVC approached stakeholders for approval to hive-off the 1,200-MW coal-fired Raghunathpur thermal power station in Purulia into a 26:74 JV with NLC.

The plant is losing heavily due to 700 MW idle capacity.

The workers have the option of either joining the JV or staying back with DVC.

The deal will help DVC in reducing loan burden from ₹25,000 crore to ₹20,000 crore and save nearly ₹900 crore annually on interest cost, helping the company to turn the corner in 2016-17.

The organisation reported a loss of ₹1,100 crore in 2015-16.

Both Delhi and Jharkhand governments okayed the deal by May last year. But West Bengal is sitting on it.

According to the State Power Minister Shovandeb Chattopadhyay, who is also the President of the ruling Trinamool affiliated workers’ union, DVC should meet workers’ demand (for promotion and increment of D and C grade employees) to get the deal cleared.

Asked if the two are unrelated, Chatterjee said the deal was agreed in the past and ‘must be met’.

According to him, DVC Chairman Andrew WK Langstieh agreed to his proposal.

“The issue rests with Didi (Mamata Banerjee),” said Pradip Banerjee General-Secretary of Trinamool union.

While Langstieh was not available for comment, sources told BusinessLine that the company entered an MoU for promotion policy of workers in February, but the proposal did not get the board’s approval.

DVC undertook a 5,200-MW own capacity addition programme in the last decade.

Of the total, roughly 4,000 MW was added in West Bengal (including two new plants at Durgapur and Raghunathpur).

The capacity addition plan had many loopholes. While the fuel supply plan was in disarray due to prevailing coal crisis and failure to operationalise captive coal blocks, projects linked to the Commonwealth Games (2010) were implemented way behind the schedule and a lion’s share of the capacities were added without firm buying commitment.

Hence, DVC went deep into the red since 2013-14 as fresh capacities started coming on stream.

Efforts over the last two years saw fuel supply issues ironed out.

Nearly 1,700 MW fresh supplies were initiated. Jharkhand paid ₹4,770 crore historic dues, under the UDAY scheme.

To protect the balance sheet, the company had already spiked 1,320 MW second phase capacity expansion plan at Raghunathpur, despite taking nearly ₹500 crore hit.

Hiving off the 1,200-MW first phase capacity will bring it out of the blues.

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