Sucheta Dalal :Bidding for DPC (10 December 2001)
Sucheta Dalal

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Bidding for DPC (10 December 2001)  

Now that Videocon has emerged as the mysterious third bidder for Dabhol Power Company (DPC), the real mystery remains. When will Reliance show interest in the project, which offers the best fit with its own plans? The company has always been interested in the Dabhol jetty, and was already negotiating for its use with Enron, fuel management deal for DPC is also right up its street and its earlier bid to produce power in Maharashtra had failed. Although it denied a news agency report about its interest in DPC, market sources say that Reliance is very much in the race—with or without BSES.

The Tatas are interested in consolidating their base in Maharashtra in power generation and distribution, but not necessarily in other components of the project. Videocon, which is already into oil exploration may emerge a serious contender if it ropes in a big international partner. The danger is that the three bidders could drive up the price.

Fortunately, all three want a basket of concessions from government including some form of secure payments, permission to export power outside the State etc. Chances are that the three would also get involved in political lobbying which, as past experience shows, could end up damaging the DPC negotiations and driving up the price rather than helping the sale. The best bet would be for the institutions to take over DPC, negotiate a set of concessions with the central and state government and then invite open and transparent bids based on these conditions.

Losing the PR war

Madav Jog of Jog Engineering is probably the best example of how to win a battle but lose a war. The politically powerful Jog is building Mumbai’s biggest flyover costing over Rs 110 crore.

The ambitious project includes a shopping mall and office complex under the flyover, right in the middle of a busy highway leading to the international airport.

The shopping mall was to finance the entire project. Predictably, the project turned controversial and sometime after the company began construction and dug up the roads, an NGO took Jog to court demanding that the mall be dropped. Jog promptly stopped construction and said, quite correctly, that until alternative financing was worked he would not sink in any money. However the long drawn court case, the bankrupt government, the traffic snarls, pollution and bad roads finally took their toll and the people lost patience with the NGO agitationists. In a rare victory for Jog, the court permitted a truncated mall and the State government was ordered to pay the cost.

Why then do newspaper carry headlines calling Jog the man Mumbai loves to hate? Why does he attract such uniformly bad press every single day? Why does the common man blame Jog for the entire mess and demand that he should never again be granted another project in the city? It can be summed up in two words —arrogance and bad PR. Having won the battle, Jog took people for granted, was rude with the press and decided that he was accountable to nobody.

Public infrastructure projects do not work that way. Also, given Jog’s enormous political clout and the gun-toting security that he used to enjoy—nobody bought his argument (however true) about not getting funds in time. Having earned a lifetime worth of bad publicity, Jog has shown how one can win the battle but still lose the war.

Wisdom dawns

After several years of inaction Indian financial institutions have been forced to get tough with defaulters only because they are themselves struggling to survive.

Not only has an institutions such as IFCI decided to sue 100 defaulting companies and appoint an outside recovery agent, it is also on a massive drive to sell assets of borrower companies and recover its investment. In fact, IFCI is not the only one. With a bailout becoming difficult and a collapse appearing imminent, the institutions are finally getting tough, at least with the softer targets—those with less political clout.

Proof of their intention was several advertisements in the pink papers announcing the sale of assets belonging to defaulter groups. Clearly, they are in dead earnest now.

Investor protection?

When SEBI suddenly did a volte face and decided to postpone sector-wise reporting of financials everybody blamed the regulator. It was the same with the decision to enhance the share buyback limit for promoters, ostensibly to boost market sentiment at the cost of investor interest. A hasty ordinance was passed and an amendment bill was pushed through Parliament although the market had already turned around. We now learn that the man who influenced this anti investor decision the most was a ruling party MP who claims investor protection as his main platform.

-- Sucheta Dalal