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'AES exit would not affect Orissa'

A threat by the Indian subsidiary of US power firm AES Corp to pullout from Orissa would not affect how well the eastern state's power sector performs, a state minister said on Tuesday.

AES, whose investment in Orissa a few years ago was hailed as the beginning of serious reform in India's power sector, has a 51 per cent stake in Cesco, an electricity distribution firm in Orissa. The Orissa government owns 49 per cent.

Last month, AES said it would sell its stake in Cesco unless the state allowed it to raise tariffs and gave it a better regulatory environment.

"It (the pullout) will have no impact at all," R K Patnaik, Orissa's finance minister, told reporters in Calcutta on the sidelines of a business conference.

Patnaik said the role of AES, which has interests in 165 power plants worldwide, had not lived up to expectations in Orissa.

"Transmission and distribution losses have come down only 1.8 per cent from the earlier 43 per cent."

The U.S. company also holds a 49-per cent stake in Orissa Power Generation Corporation, which sells electricity to state-run transmission firm Gridco.

AES complained that Gridco was not paying OPGC's charges, which had mounted to $45 million last month. Gridco says it cannot pay because Cesco owes Gridco an even bigger amount.

"What is happening between Cesco and AES is their internal affair. The state has absolutely no role to play in this. But we will step in if we receive an SOS from Cesco," Patnaik said.

Foreign power utilities, which entered India in the early nineties, have faced rough weather due to a slowdown in the pace of economic reform.

Recently, Enron Corp announced its intention to exit the $2.9-billion Dabhol plant in India.

Four other firms have already pulled out of India.

They include US company Cogentrix, which walked out of a project to build a 1,000-MW plant in southern India last October, and Electricite de France, which scrapped plans to take a 15 per cent stake in a project in western India.

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