New Delhi: India’s power ministry has refused to change its stance on a contractual dispute between power generator NTPC Ltd and Russia’s Technoprom Exports (TPE) that Russia has linked to India’s request for a stake in the Sakhalin-3 oil field.
Russia’s President Dmitry Medvedev arrives in India on Thursday.
India wants the dispute to be resolved through adjudication. Meanwhile, the deal itself is being investigated by Interpol and the Central Bureau of Investigation which believe that bribes were paid to secure the supply of boilers by the Russian company to NTPC.
The Technoprom story involves the Rs8,700 crore Barh power project in Bihar that was started in 1999. The Russian firm got a contract for the supply of boilers to the much-delayed project in February 2005. However, work on the project stalled after a contractual dispute between NTPC and Technoprom, with the Russian firm demanding more money for the equipment, citing higher steel prices.
Mint reported on 24 November that Russia had linked this payment to India’s request for a stake in Sakhalin-3—something the country needs in the interests of energy security. NTPC stands to lose around Rs1,500 crore if it accedes to Technoprom’s demand for more money.
Power ministry documents reviewed by Mint state: “TPE has raised the issue of time extension in the contract schedule and removal of price variation ceiling of 20% provided in the contract attributing delays in engineering, issue of amendment regarding change in its legal status and site related issues, etc. to NTPC’s account. NTPC has refuted TPE’s claim as the same is not justified and accordingly not tenable.”
India’s junior power minister confirmed that the issue had gone beyond being a mere contractual dispute and taken on diplomatic hues.
“The adjudication report has been submitted by Anil Dev Singh, the retired chief justice of the Rajasthan high court, on 28 November as scheduled. It is now to be studied by a task force within NTPC. The financial implications are substantial. We not only have to protect NTPC’s interest but also have to keep in mind the India-Russian relations. We are keen to resolve the dispute and have met the top Technoprom management and the Russian ambassador,” said Jairam Ramesh, minister of state for power and commerce.
Still, resolving the issue won’t be simple, said a senior power ministry official. “The matter has been complicated following a probe involving the Central Bureau of Investigation as well as Interpol over alleged bribes paid for the boiler supply contract through an offshore transaction. This makes resolving the dispute a problem. Let the NTPC board decide what it wants to do.”
Interpol has told the central investigation agency that an offshore transaction did take place that involved transfer of Rs90 crore to Raveena Associates, Technoprom’s agent in India, as reported by Mint on 17 June.
A senior NTPC executive who did not want to be identified said: “We will go by our contract, the value of which is around Rs2,066 crore. Whatever Technoprom is demanding is its viewpoint and not ours.”
India’s national security adviser M.K. Narayanan was to hold a meeting on 25 November to discuss the contractual dispute and the bribery probe, but the meeting was called off. Russian energy minister Sergei Shmatko’s meeting with Indian government officials on the same date ended inconclusively because NTPC refused to budge from its earlier stand that the matter should be resolved through adjudication.
Raveena Khurana of Raveena Associates did not respond to phone calls or a message left on her mobile phone.
Russia’s position on the deal, linking it with India’s request for a stake in Sakhalin-3, was made clear when India’s petroleum minister Murli Deora met that country’s Prime Minister Vladimir Putin in November. Since then, the petroleum ministry has washed its hands of the issue and said the power ministry would have to decide on acceding to Technoprom’s demand for more money.
NTPC is India’s largest power generation company with a capacity of 29,144MW. The delay in the Barh project will affect its plans to raise the capacity to 50,000MW by 2012.
India, the world’s fifth largest oil importer, is hoping to get a share of the Sakhalin-3 crude.