New Delhi: Sometime in the next few weeks, the power ministry may send a note to the cabinet committee on security asking for permission to make an additional payment to Russia’s Technopromexport (TPE) for the supply of equipment to state-owned power utility NTPC Ltd.
If this committee, comprising the Prime Minister and the ministers of defence, home, external affairs and finance, agrees—and there is no reason it should not, because the note is part of the plan to resolve this issue—it will end a murky story involving kickbacks that escalated into a diplomatic spat between India and Russia.
Decisions taken by the panel don’t have to be cleared either by the cabinet or Parliament.
“We are in the process of finalizing the note for CCS (the cabinet committee on security). This is a political decision to be taken by the government. Before we send it to CCS, we will seek an approval from the empowered group of ministers constituted to resolve the issue,” said a top power ministry official, who did not want to be identified due to the sensitive nature of the issue. The members of the panel are finance minister Pranab Mukherjee, home minister P. Chidambaram and power minister Sushilkumar Shinde.
The genesis of the controversy dates back to February 2005, when the Russian firm won a contract to supply boilers to NTPC’s 1,980MW Barh project in Bihar. But work on the project stalled soon, with TPE demanding more money for the equipment, citing higher steel prices. TPE wanted extension and removal of the 20% cap on price escalation.
Meanwhile, it emerged that TPE had violated one of the terms of the contract by hiring an agent that facilitated the deal. This was an Indian firm called Ravina and Associates Pvt. Ltd. Mint reported on 17 June 2008 that Interpol had informed the Central Bureau of Investigation (CBI) of an offshore transaction where TPE had transferred the equivalent of Rs97 crore to the agent.
But the Russians wanted the deal to go through, and India, which has been seeking a stake in Russian oilfields and wants technology for reprocessing nuclear fuel from the country, didn’t want to spoil relations.
India is also negotiating several defence deals with Russia and, even as the TPE issue festered, was in the process of acquiring an aircraft carrier from that country.
Russia’s Prime Minister Vladimir Putin had helped hammer out a deal with India to resolve the five-year-long dispute over TPE contract as reported by Mint on 13 March.
In 2008, during a visit by Russian President Dmitry Medvedev, India signalled that it was willing to discuss the boiler deal; in March, following a visit by Putin, it said the issue had been resolved.
“We have taken a decision. Price escalation dispute between NTPC and TPE has been settled and an agreement has been signed to that effect,” Shinde had told Mint then.
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.
While TPE’s India representative did not respond to phone calls and to a text message to his cellphone, a top NTPC executive, who did not want to be identified, said, “It’s for the Indian government to take a decision. We’ll follow whatever the government asks us to do since we are a government-owned company. While we wanted the contract to be cancelled, there are constraints on part of the government due to larger strategic issues which involves Russia’s cooperation. With CBI investigation on, the government is trying to find a way (out).”
India had dithered over an earlier proposal for the cancellation of the contract and TPE’s blacklisting, even though a cabinet note on this was ready. Mint couldn’t immediately ascertain if CBI’s investigation will continue.
Still, the completion of the Barh project, which will generate 1,980MW, should help feed growing demands for energy in one of the world’s fastest growing economies.
“Even if we make additional payments, once the project is executed it will ultimately work out in our favour,” said another NTPC executive, who did not want to be identified.