New Delhi: The government may have, in the interests of India’s relationship with Russia, brokered a compromise between state-owned NTPC Ltd and the latter’s Technoprom Exports (TPE) over a deal gone sour, but India’s Central Bureau of Investigation (CBI) seems to have complicated matters by concluding that the Russian firm did indeed breach its contract to supply boilers to the Indian firm’s power project in Barh, Bihar.
The report submitted by CBI to the government shows that the breach was committed when TPE, in violation of the terms, hired an agent to facilitate the transaction. The submissions of the country’s apex investigating agency pose a piquant challenge to the government, since it has, after considerable efforts, brokered a compromise to resolve the dispute between NTPC and TPE.
“CBI in its report has said that there was a breach of contract made by the Russians,” said a minister in the United Progressive Alliance government, who did not want to be identified.
A CBI spokesperson had not responded to questions emailed by Mint till late Thursday evening.
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. The Russian firm 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 had reported on 17 June 2008 that Interpol had informed CBI of an offshore transaction where TPE had transferred the equivalent of Rs97 crore to the agent.
“The report was submitted around two months back. As far as NTPC is concerned, we had awarded the project properly. That has been proved. We in our recommendation had already asked for the cancellation of the contract. However, this is not a simple commercial decision and has a strategic angle attached to it,” said an NTPC executive aware of the submission of the report, but who did not want to be identified.
The executive was referring to the Russian government’s efforts to lobby for the deal even as India seeks to strengthen its commercial and defence relations with its long-term ally. Russia’s Prime Minister Vladimir Putin had helped hammer out a deal with India to resolve the five-year-old dispute over the TPE contract.
While TPE’s India representative and Ravina Khurana of Ravina and Associates did not respond to phone calls and to text messages left on their cellphones, another NTPC executive, who also did not want to be identified due to the sensitive nature of the issue, said: “The CBI report is with the government and it is for them to take a holistic view on the issue.”
In 2008, during a visit by Russian President Dmitry Medvedev, India had signalled that it was willing to discuss the boiler deal; in March this year, following a visit by Putin, it said the issue had been resolved.
The power ministry plans to send a note to the cabinet committee on security asking for permission to make an additional payment to TPE for the supply of equipment to end the controversy that escalated into a diplomatic spat between India and Russia.
While TPE was demanding an additional Rs1,700 crore, NTPC and the government were in favour of paying an additional Rs537.16 crore. TPE subsequently scaled down its demand to around Rs971 crore.