TPE, Power Machines delay Barh project in Bihar

The project’s first unit is now expected to go online only in November 2015, a delay of more than two years, according to new estimates by NTPC.

This will affect the commissioning of the first stage of the project that’s to have a capacity of 1980 megawatt (MW), enough to meet around half the power demands of Delhi. According to the new estimates, the first stage being developed by the Russians may only be completed by March 2017 as against the earlier date of September 2014.

The first phase of the project became embroiled in a controversy after India’s Central Bureau of Investigation concluded that TPE breached its contract to supply boilers for the three units of 660MW each for Rs.2,066 crore. The government, in the interests of India’s relationship with Russia, brokered a compromise between NTPC and TPE.

“The supplies are not coming. Even the drawings are not being released. This after the Russians agreeing to the revised deadlines for a project that has been long overdue,” said a senior NTPC executive, requesting anonymity. “We have taken up the issue with the government, which in turn has taken it up with the Russians.”

The dispute had become a test of India’s ability to balance commercial and diplomatic interests with Russia as Russian President Vladimir Putin and Prime Minister Dmitry Medvedev had helped hammer out a deal with the Indian government.

The Barh project has a total planned capacity of 3,300MW. Of this, the second stage of the project with a capacity of 1,320MW is being constructed by state-owned Bharat Heavy Electricals Ltd and is expected to be fully operational by September 2014.

According to the revised timeliness agreed upon for the Barh project, the first unit of 660MW was to be commissioned by September 2013. According to NTPC’s estimates, however, this is now only expected to be commissioned by November 2015. The second 660 MW unit, which was to be commissioned by March 2014, is now estimated to be completed by July 2016. The third 660 MW unit may only be completed by March 2017 as against the earlier agreed date of September 2014.

“The NTPC board was ready to terminate the contract. It was only after a Presidential directive that a compromise was reached,” said a former NTPC board member, requesting anonymity due to the sensitive nature of the issue.

Another NTPC executive, who also didn’t want to be identified, confirmed the delays and said even the envisaged schedules on “best effort” by March 2017 was “unlikely”.

“We want them to expedite the submission of drawings,” said the second NTPC executive.

An NTPC spokesperson didn’t respond to Mint’s query emailed on 30 December; TPE and a TPE representative in India also didn’t respond toMint’s query emailed on 31 December.

Queries emailed to Power Machines also remained unanswered.

The genesis of the TPE controversy dates back to February 2005 when the Russian firm won a contract to supply boilers to NTPC’s 1,980MW Barh project.

But work on the project stalled soon, with TPE demanding more money for the equipment citing higher steel prices. The Russian firm wanted an extension and removal of the 20% cap on price escalation. TPE had allegedly violated the terms of the contract by engaging an agent, Raveena Associates.

According to documents reviewed by Mint, the delays were due to financial constraints faced by the Russian firm and a team from TPE had visited Barh in September last year.

Experts say both consumer and strategic interests should be protected.

Anil Razdan, former power secretary, said, “While I have always valued a strengthened relationship with Russia and their friendship, in the event of anything being done beyond the contractual agreement, any grant if it needs to be given should be given by the appropriate ministry in the government of India, which nurtures strategic relations with Russia. The onus of additional contractual cost beyond permissible limits should not fall on NTPC or the power consumers.”

NTPC had extracted firm completion deadlines from TPE and Power Machines for the Barh and Sipat (in Chhatisgarh) thermal power projects.

“While the Sipat project is complete, with only the PG (performance guarantee) test left, the problem is with the first stage of Barh project. Bhel has already commissioned one 660 MW unit of second stage,” said the first NTPC executive cited earlier.

“We have been talking with TPE as they, in turn, have sub contracted some work to Power Machines. Even a team from Russia had visited the site, but nothing much has come out of it,” the executive said.