Prequalified bidders, practically all of them, withdrew and left the field open for only NTPC to secure these contracts for setting up ultra-mega power plants in Odisha and Tamil Nadu
From the press reports, it is now certain that the two 2x4,000 MW ultra-mega power plants (UMPPs), to be located in Odisha and Tamil Nadu, will now be further delayed, simply because the prequalified bidders, practically all of them, withdrew and left the field open for only NTPC to secure these contracts.
It may be recalled that apart from NTPC, others in the race, which were prequalified, for the Odisha UMPP were NHPC, Tatas, Adani, JSW Energy, Jindal Power, Sterlite, CLP and Larsen & Toubro.
For the Cheyyur project, also 4,000 MW, in addition to NTPC, others who were prequalified, included Adani, CLP, GMR, Jindal, JSW Energy, Sterlite and Larsen & Toubro (L&T).
In order to facilitate the work and based on past experience, the government revised the existing standard bidding forms a year ago, and preliminary bids were invited. While revising the bidding forms, the government it seems, took care to make a provision that, in case of any increase in fuel costs, this could be passed on to the consumer as "higher tariff".
However, it would appear that the fly in the ointment was the provision that the successful bidder had to source the equipment from domestic manufacturers.
But it is an entirely different story that the domestic manufacturers have protracted delays in supplies and more expensive than imported counterparts; most of which, in any case, in recent times, have come from China which have been found to be "inferior". In fact, to protect the indigenous suppliers, the import duty element was also revised upwards.
In the case of Cheyyur Plant in Tamil Nadu, the entire project was to be based on the assumption that the entire coal requirement would be imported, while, in the case of Odisha, it was designed to source its own coal from captive coal blocks allotted for this purpose.
There was also the issue of inordinate delays associated with the forest and other clearances in such projects, particularly, in case of coal blocks. In a strategic move, MoEF had decided that the go-ahead for power stations of such projects will no longer be linked to clearance of their captive blocks.
For the UMPP at Bedabahal in Odisha, Ministry of Coal had allocated three coal blocks, viz, Meenakshi, Meenakshi B and dip side of Meenakshi. These were in fact allocated in September 2006. In the changed circumstances, where there is only one bidder, NTPC, we do not know what steps the government may propose to take so that these two projects do not get delayed further.
At the same time, it is necessary for the Power Minister to have an open discussion with the prequalified bidders as to what made them withdraw their interest in bidding.
So far, three UMPPs are with Reliance, partly operational and only one with Tatas at Mundhra, Gujarat, which is fully functional.
Urgent steps are needed to settle this matter.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
Fiercely independent and pro-consumer information on personal finance.
1-year online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
Complete access to Moneylife archives since inception ( till the date of your subscription )
Where does the question of propaganda comes up, and in whose favour or against?
Dr Arup Roy Choudhury, CMD of NTPC is reported to have stated to the press that "NTPC would consider plants that were expensive and in the range of Rs 6 crore per MW; he said it would still work if land, power purchase agreements (PPA), cost of coal, fuel linkage, water and other factors fell in place".
NTPC itself has plans to seek clarification from the Supreme Court on the cancellation of two mines - the Tallaipali mines in Chhatisgarh and Dulanga mines in Odisha which are similar to the Pakri-Barwadih coal block in Jharkhand, which the Court had cleared.
Clarification has been sought about the status of mines (Meenakshi mines, which were allocated in 2006). Generally it takes 6/7 years before a coal block becomes fully functional, as per media reports available on the subject, because of clearances. Prakash Javadekar had assured that MoEF would not be a stumbling block and spoke of waivers for government organizations.
So, for any reason, if the authorities decided to cancel the bidding process, because there is only one bidder, would we not have lost so much valuable time? NTPC are already doing a great job but these delays would affect their ultimate plans to deliver the power,which appears to be beyond their control. This is what I had mentioned in the case of Odisha/TN.
No where have I said that we should buy Chinese goods or not to buy indigenous equipment! We need to expedite deliveries so that the overall project does not get inordinately delayed.
It is your turn, Mr Dave, to tell us what you are talking about?
Have you seen the recent bid awards for Mega power projects of 1,320 MW and 1,980 MW? The costs are well below Rs.4 cr. / MW despite the equipment being manufactured domestically. Four years ago, this used to be much higher, while the Chinese were selling at these rates by importing equipment for which we neither had verifiable operational history, nor the ability to trace the actual cost structure. It is well known that the Chinese Gov't helps its exporters undercut the overseas market by providing free financing and other facilities, as well as various subsidies.
It is extremely fair that India's domestic manufacturers, who have invested a huge amount of money in technology and manufacturing capacities, who are burdened with Excise etc. are put on a level playing field with imported equipment - and therefore, you have both Countervailing Duties and Anti-dumping Duties levied on Chinese equipment.
One advantage that the Chinese used to have was an undervalued currency. However, they have been forced to reduce the undervaluation, and at the same time, the INR has depreciated heavily. This makes imported equipment, already bearing CVD+ADD unattractive for Indian power producers.
There are no private players willing to invest in new thermal capacities. They have solvency problems, stuck or loss making projects, and nobody willing to pay them a premium on equity - only their fault. Only State and Central utilities have some appetite. The CEA has recommended buying domestically till October 2015, but Tamil Nadu violated this guideline recently for the Ennore 600MW project.
However, the biggest stumbling block for the Chinese is their equipment's efficiency. Now all Gov't Gencos including NTPC have started following an evaluated price mechanism, where lifecycle costs are considered, not the nominal bid price. This makes Chinese equipment uncompetitive after duties, taxes & Forex, and rewards domestic manufacturers for higher efficiency and cost reduction through value engg. + supply chain management efforts.
The real reasons UMPPs may fail are: 1. Lack of visibility of coal supply, even from captive mines, and 2. Inability of State Discoms to absorb higher power costs due to imported coal or domestic price hikes.
Paint a correct picture. Don't slap on propaganda.
BHEL bags Rs 7,800 cr order in Tamil Nadu
Bharat Heavy Electricals Ltd (BHEL) has received Engineering, Procurement and Construction (EPC) orders worth Rs 7,800 crore from Tamil Nadu Generation and Distribution Corporation Ltd (TANGEDCO) for a 1320 mega watt (MW) plant near Chennai. The company said that the order is to set up a 2X660 MW coal-fired supercritical thermal power project at Ennore SEZ.
http://www.business-standard.com/content...