NTPC board to take decision on controversial tender on 21 June

State-run NTPC Ltd’s board is expected to take a decision on 21 June about a Rs40,000 crore contract for so-called supercritical power generation equipment that has been marred by controversy.

The controversy is over the eligibility of one of the bidders—a joint venture (JV) between Larsen and Toubro Power Ltd (L&T Power) and Japan’s Mitsubishi Heavy Industries Ltd (MHI)—to pitch for the contract to supply boilers. The only other bidder is state-run Bharat Heavy Electricals Ltd (Bhel).At a board meeting on 21 June, NTPC will decide on the eligibility of the JV, whether to go ahead with the award of the contract for supply of boilers or to opt for a re-tender.

NTPC recently floated the tender for supercritical power projects, inviting bids to supply 11 boilers and 11 turbines of 660MW each that would be locally built. Nine packages of boilers and turbines are meant for NTPC ’s projects and two for Damodar Valley Corp.Supercritical equipment such as boilers and turbines improve the efficiency of power plants and are environment-friendly.

The efforts to boost domestic hi-tech power equipment manufacturing suffered a jolt, with just the L&T-MHI venture and Bhel bidding to supply the boilers. L&T Power is a subsidiary of Larsen and Toubro Ltd (L&T).

“L&T should have formed a joint venture with MHI and not L&T Power, a subsidiary, as has been the case now. Subsidiary is not the main company. This doesn’t qualify as per tender requirements,” said a top power ministry official who did not want to be identified.

The scrutiny of the two-stage tender involving technical and commercial bids is under way and NTPC expects to award the contract by July. The equipment NTPC wants to buy will help the thermal power generator achieve higher plant efficiencies and economies of scale.

Ravi Uppal, chief executive and managing director of L&T Power, and R.S. Sharma, chairman and managing director of NTPC, declined to comment on the JV’s eligibility according to the tender requirements.

“There are certain issues. The matter is under the examination and discussion with NTPC and the competent authority to decide upon it is the board. We plan to take it to the board shortly. It may go through or it may not go through,” said Sharma.

Another issue pertains to complete technology transfer.“If the parent company takes the whole risk of the subsidiary then there is no problem,” said another NTPC executive, who did not want to be identified due to the sensitive nature of the issue.

“They can quote through a JV provided the parent company takes the whole risk. Either MHI takes the whole commercial and technical risk or the other partner. If they (JV) get disqualified, then only Bhel gets left, which defeats the very basis of the tender to promote domestic manufacturing. In that condition, re-tendering is the only option,” the executive said.

The tender said the winner would have to set up factories in India to develop the local power generation equipment manufacturing industry. Such projects typically tend to be capital-intensive, with investment running into several thousand crores of rupees.India expects to add 62,000MW by 2012. Orders for 42,431.58MW have been placed with Bhel, the country’s largest power equipment maker, which has an annual capacity of 10,000MW.