The controversy surrounding the country’s first ultra-mega power project in Sasan, Madhya Pradesh took a new turn with NTPC Ltd, India’s state-owned power generation firm, saying that according to government rules, the bidding process will have to start afresh if the original promoter Lanco Infratech Ltd was disqualified.
“The only solution is to call for a rebid,” said an executive at NTPC who did not wish to be identified. NTPC’s claim came on Thursday; the evaluation committee headed by HDFC chairman Deepak Parekh is to meet and review bids for the Sasan project. Anil Ambani’s Reliance Energy Ltd was the second-lowest bidder after Lanco for the project.
The 4,000 mega watt (MW) ultra-mega power project, estimated to cost Rs18,000 crore, was awarded to a consortium comprising Hyderabad-based Lanco and Globeleq Singapore Pte., a subsidiary of Houston-based Globeleq. But the consortium began to undergo changes after the parent of Globeleq decided to sell some of its global assets.
Lanco and Jindal Steel and Power Ltd acquired the Globeleq stake in the Sasan project, making the former the majority partner. “Any change in ownership structure is actually altering the basic conditions on which the project was awarded.” said the NTPC executive.
This is consistent with the guidelines that were laid down for the Sasan project, which state that a promoter cannot divest more than 49% of the equity until two years after the project starts commercial production, and will have to retain at least 26% for another 10 years.
In the event of the selected bidder being a consortium, the conditions apply only to its lead member, and not all the promoters or stakeholders in the project entity. The bid document itself (which is the basis on which bids are made) is not forthcoming on what should be done in the event of such a development.
NTPC has made its case on the basis of a circular of the central vigilance commission (CVC), a government body, dated 24 August, 2000, which states “If L1 party (the company with the lowest bid) backs out, there should be retendering in a transparent and fair manner.
The authority may, in such a situation, call for limited or short notice tender if so justified in the interest of work and take a decision on the basis of the lowest tender.”
The Sasan project has been mired in controversy, with REL having made repeated representations to the power ministry questioning the process and Lanco’s qualifications.
REL had quoted a tariff of Rs1.29 per unit compared with Lanco’s bid of Rs1.19 per unit (power projects are awarded to the company that quotes the lowest amount for each unit of power generated). Though NTPC was expected to be the most aggressive bidder, it had quoted a tariff of Rs2 per unit .
Meanwhile, the man behind the company at the centre of the controversy was confident that his company would be setting up the project at Sasan. “We will be setting up the project as we have met all the criteria,” said Lanco Group chairman L. Madhusudhan Rao..
The Lanco scrip closed at Rs176 on the Bombay Stock Exchange, well down from its 52-week high of Rs276.