In areas such as Chandigarh, Dadra & Nagar Haveli, Lakshadweep and Pondicherry, it is not in the national interest to privatise the DISCOMs – E A S Sarma, former Secretary to Government of India


Letter by Shri E A S Sarma to Shri A K Bhalla, Union Home Secretary


E A S Sarma

Shri A K Bhalla
Union Home Secretary

Dear Shri Bhalla,

The Ministry of Home Affairs (MHA) seems to be rushing into privatising the electricity distribution systems in the Union Territories (UTs). I understand that the proposal to privatise the Chandigarh DISCOM is at an advanced stage. So is the case with the DISCOMs in Dadra & Nagar Haveli, Pondicherry and Lakshadweep. Apparently, your Ministry has not considered the strategic implications of such privatisation.

All these UTs are located either adjacent to the international borders or at strategic locations along the sea coast. With no restrictions on the entry of FDI in the private power companies and with no mention of any pre-condition in the bid enquiries for privatisation, it is possible that questionable foreign agencies soon get a foothold in the private DISCOMs, endangering the public interest and the national security.

The likelihood of this is best illustrated by the fact that your Ministry had not raised any concern whatsoever, when 25 cities across 12 States awarded contracts of real time power supply and data management, communication infrastructure to Chinese companies under the Centrally Sponsored Scheme, Integrated Power Development Scheme (IPDS). Many of these States have either international borders or have strategic coastal facilities. The Chinese company, Dongfang Electric Corporation (DEC), which has been awarded these contracts, is directly supervised by the Chinese government. There are also seven States and Central public sector undertakings which have awarded contracts for power communication infrastructure to various Chinese companies. This pertains to optical fibre network alongside power transmission network for receiving and transmitting data on the power network.

The real time power system information to which such foreign companies get ready access has far reaching national security implications.

I feel that in areas such as Chandigarh, Dadra & Nagar Haveli, Lakshadweep and Pondicherry, it is not in the national interest to privatise the DISCOMs. I am not sure whether the MHA has apprised the Union Cabinet of these implications while placing the privatisation proposals before it. Had the Union Cabinet been aware of this, I am sure that it would have thought twice before approving the privatisation proposals.

Privatisation as such has very few advantages to offer. The disinvestment proceeds do not really add to the fiscal resources, as clearly indicated in an interim report released recently by the People’s Commission, a civil society forum, of which I am a member. In addition, privatisation of a public utility like the DISCOM is violative of the Constitutional provisions, as explained in that report. You may access the report at

The benefits expected by the government from privatising public utilities like the DISCOMs are non-existent. On the other hand, there are far reaching adverse public interest implications of privatisation that the government cannot afford to ignore.

I request your Ministry to advise the Union Cabinet, even at this belated hour, not to rush into privatising the DISCOMs, especially those in the UTs.

Visakhapatnam 530002



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