NTPC delays compound power woes

Many key projects of public sector NTPC Ltd is running behind schedule, thanks to a tortuous decision-making process. The slackness of India?s largest power utility is adding another reason for the country to miss the target to add 78,700 mw to its generation capacity in the 11 th Five-Year Plan. The government has recently admitted to huge slippages in the Plan to build new power generation capacities.

NTPC, sources say, has deferred its Barh-I and Sipat-I projects, with a combined capacity of 4,000 mw, owing to prolonged commercial disputes with contractors. Even smaller projects of the PSU, which once prided itself on its track record in project management, are trapped in tendering delays. The case of Badarpur, Delhi, plant is illustrative. For the renovation & modernisation (R&M) of the plant, the company stalled the tendering for 17 months just for a capacity gain of 1 mw.

NTPC?s mega projects such as North Karanpura and Lara have also faced inordinate delays, though for reasons other than slow decision-making. The proposed 1980 mw North Karanpura project is delayed for difficulties in securing statutory clearances and land acquisition. Similarly, the 4000 mw Lara project is stuck on differences with the Chhattisgarh government over the state?s demand for free power.

Industry sources say NTPC placed orders with Russia?s Technopromexport (TPE) for the supply of boiler to its Barh-I project on March 14, 2005. TPE then was a Federal Unitary Enterprise. Subsequently, the Russian government, through a decree, raised its share in TPE to 100%. That led to a minor change in its name, though there was no impact on its legal status.

However, NTPC held back payment to the Russian vendor on the suspicion that the decree had changed the legal status of the vendor.

Finally, NTPC ascertained through ?due diligence? that there was no substantive change in the contractor?s status. But it took too long a time to reach this conclusion. During this period, the contractor halted work pending resolution of the dispute.

TPE blamed NTPC for the delay and raised extra financial claims, citing a rise in steel prices. It claimed cost escalation of 87% but under contractual terms, NTPC can bear only up to 20% of the extra cost. Result: the project is stuck. The first unit of the Barh-1 was to be commissioned by January 2009, but the project is delayed by 46 months, and the issue of cost escalation still unsettled.

Implementation work on the boiler package for the Sipat-I project is also suspended, pending resolution of similar commercial issues between NTPC and the boiler supplier. Escalation claims have arisen here as well.

As for the Badarpur plant, the existing Russian-design equipment of 210 mw capacity at the fourth and fifth units have become obsolete. NTPC issued tender on June 13, 2008, for the renovation of the two units, with the conditionality that after implementation of the R&M programme, capacity should go up from 210 mw to 216 mw. Bids were to be submitted on August 28.

However, 17 months on, NTPC is still far from finalising the contract for equipment supply. The company has, meanwhile, reduced targeted capacity enhancement from 6 mw to 1 mw. When contacted, an NTPC spokesperson declined to comment on this issue.

Industry sources overseas equipment suppliers Doosan, Skoda and Alstom as well as Bhel purchased bid documents for the project. The overseas suppliers did not see any insurmountable technological challenge in complying with the conditionality and confirmed their decision to submit bids. However, Bhel said it could not meet the conditionality. Unable to take a decision, NTPC kept extending the bid submission dates. The last date now is Nov 19, 2009.

In March this year, a Chinese equipment supplier approached NTPC with a desire to participate in the bid, showcasing its cost-competitive technological capability in renovating ageing plants. But NTPC has refused to extend the sale date of tender documents, though World Bank guidelines, for projects funded by it, stipulate that if bid submission date is extended, sale date of tender documents should also be extended.

Not extending the date for document sales would mean only the four who initially purchased the documents can bid for the project, thus, NTPC losing an opportunity to get more competitive bids.

NTPC has 17 ageing units at places such as Singrauli, Vindhyachal and Kahalgaon, which will need renovation in coming years. If it moves at the current pace, R&M of these units won?t be done in time.