Delay in equipment contract tender to short-circuit NTPC's 12th Plan target

NTPC now faces the prospect of delays in the awarding of contract for supercritical equipment following its decision to re-tender for the bulk supply of boilers. This may derail NTPC's plan to expedite its 12th Plan capacity programme. The power major was earlier banking on additional domestic power equipment manufacturing facility, which is coming up in the private sector, to meet its 12th Plan capacity addition target. NTPC has only itself to blame for the mess it has landed into. In a bid to hasten tendering, NTPC rejected Italian manufacturer Ansaldo's request for a two-month extension for bid submission. However, the company is now back to where is started from.

The company has decided to scrap current tendering for the bulk supply of boilers for 6,000 mw capacity after L&T Power was disqualified. Only L&T Power and Bhel had submitted bids for the supply of supercritical boilers. L&T Power is a subsidiary of L&T which has signed a required technological collaboration agreement with Japan's Mitsubishi Heavy Industries (MHI) for manufacturing supercritical boilers. L&T Power's technical bid was rejected by NTPC owing to the fact that the technological collaboration agreement was signed by the parent company and not by L&T Power which was in the bidding race. L&T Power's bid for the supply of turbine generators was also rejected for the same reason. However, four players are still in the bidding race for the supply of turbine generators and NTPC has decided to go ahead with the tendering. However, since NTPC has decided to invite fresh bids for the supply of boilers, it might lead to a delay in awarding contracts for turbine generators as well. The government, while talking about a tender by NTPC for the bulk supply of supercritical equipment, had said that in order to bid, a company needs to have a manufacturing facility in India.

Private players like L&T, Bharat Forge , JSW and GB Engineering are setting up greenfiled facilities in India to manufacture supercritical power equipment to benefit from the government's policy. Public sector supplier Bhel is also expanding its manufacturing capacity to 20,000 mw a year and expects to commission the expanded capacity by March 2012.

The Cabinet Committee on Economic Affairs (CCEA) had granted its approval to the bulk tendering proposal in January last year. NTPC had floated the tender in October and the last date for submission of bids was January 28. It is unclear why NTPC was in such hurry that it could not consider Ansaldo's request for extension of bid-submission, since the contractors take on obligations while submitting bids and have to take on risks emanating from foreign exchange variation and and movement in raw material prices. In contrast, developers need not accept bids and so also, do not face any such risks.

NTPC has envisaged adding 32,0000 mw capacity during the 12th Plan. If the company's tendering proceeds at the current pace, it is unlikely to see any improvement in its capacity addition performance during the coming Plan.