New Delhi: Russian Prime Minister Vladimir Putin has helped hammer out a deal with the Indian government to resolve the five-year-long dispute over Technopromexport’s (TPE) contract to supply equipment to power utility NTPC Ltd.
The Russian firm had won a contract in February 2005 to supply boilers to NTPC’s 1,980MW Barh project in Bihar. But work on the project stalled after TPE demanded more money for the equipment, citing higher steel prices.
TPE had sought an extension and the lifting of the price variation ceiling of 20%, owing to delays in engineering, issues involving amendments about legal status and site-related issues.
“We have taken a decision. Price escalation dispute between NTPC and TPE has been settled and an agreement has been signed to that effect,” said power minister Sushil Kumar Shinde after a meeting during Putin’s two-day visit, which ended on Friday.
The dispute had become a test of India’s ability to balance commercial and diplomatic interests, while ensuring that ties with Russia weren’t jeopardized.
The row was holding up the country’s quest for a stake in the Sakhalin-3 crude oil fields, apart from which India didn’t want to rock ties with Russia as it’s seeking access to nuclear reprocessing technology, the fixing of a price for the Admiral Gorshkov aircraft carrier, besides other defence deals.
Putin had spelt out Russia’s stand during Indian petroleum minister Murli Deora’s visit to the country in November 2008.
According to the terms of the agreement being worked out after a nearly two-hour meeting that included TPE, NTPC and Indian power ministry officials, it was agreed that work on the project will begin in 45 days and both firms would jointly agree on an escalation amount over and above the contract value of Rs2,066 crore.
While TPE was demanding an additional Rs1,700 crore, NTPC and the government were in favour of paying an additional Rs537.16 crore. TPE has scaled down its demand to around Rs971 crore.
“Certain parameters were discussed according to which the new milestones for the projects will be jointly finalized by NTPC and TPE,” said a top power ministry official, who did not want to be identified due to the sensitive nature of the issue. “The cost escalation is to be worked out as per the existing contract. Once it has been worked out, the companies will come back to us. Even TPE has come down half-way from their earlier demand of around 83% increase.”
Mint had reported on 19 December 2008 about India relenting on the dispute under pressure from Russia following the visit of President Dmitry Medvedev.
India had been dithering over the cancellation of the contract and TPE’s blacklisting, even as a cabinet note on this was ready.
While repeated phone calls and a text message sent to TPE’s Indian representative’s cellphone remained unanswered, a senior NTPC executive said on condition of anonymity: “The Indian government has to give us a direction. There are government compulsions and they are not able to circumvent that. There is also a Central Bureau of Investigation (CBI) case.”
TPE had allegedly violated the terms of the contract by engaging an agent—Raveena Associates. Besides, Mint had reported on 17 June 2008 that Interpol had informed CBI of an offshore transaction that had involved the transfer of around Rs97 crore to the agent.
“While we have been against any abnormal additional payment to TPE, if the government wants this, what can we do?” said another NTPC executive, who also did not want to be identified.