New Delhi: India is keen on resolving a dispute between NTPC Ltd and Russia’s Technopromexport (TPE) during Russian Prime Minister Vladimir Putin’s two-day visit this week, but finds itself in a quandary as the state-owned utility is insisting on a solution within the contractual ambit.
TPE 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.
Besides, as Mint had reported on 17 June 2008, Interpol had informed India’s Central Bureau of Investigation (CBI) of an offshore transaction that had involved the transfer of around Rs97 crore to Raveena Associates, TPE’s agent in India.
“This case is very complicated. As far as NTPC is concerned, TPE has violated the terms and conditions of the contract by engaging an agent. First, this has to be settled,” said a top NTPC official, who did not want to be identified. “Then whatever settlement is being talked about should pass the due diligence test... We are maintaining our stand.”
Graphic: Ahmed Raza Khan/Mint
The contract value was around Rs2,066 crore, but TPE is demanding an additional Rs1,700 crore.
While NTPC is unwilling to pay the latter sum, both the utility and the government favour paying an additional Rs537.16 crore.
“Our stand is that, according to the CBI investigation, the government has to take a decision... We have agreed to a 20% increase in the contract value as per the terms and conditions of the contract. In addition, we are also willing to give another 6%,” said a power ministry official, who, too, did not want to be identified due to the sensitive nature of the issue. “Resolution should not be one sided. Even TPE should scale down their demands.”
The dispute has become a test of the country’s ability to balance commercial and diplomatic interests as Russia is holding up India’s quest for a stake in the Sakhalin-3 crude oil fields until the dispute over the boiler deal is resolved.
Putin had spelt out Russia’s stand during Indian petroleum minister Murli Deora’s visit to the country in November 2008.
“While we want defence deals, they (the Russians) want (the) TPE dispute to be resolved. Let us see what happens during this visit,” the ministry official said.
India has been dithering on the cancellation of the contract and TPE’s blacklisting, even as a cabinet note on this was ready and a sub-committee of power ministry officials had been formed to resolve the problem ahead of a visit by Prime Minister Manmohan Singh to Russia in December.
“The Russians have messed up the project. It is very difficult for NTPC to accede to TPE’s demand,” said a senior cabinet minister on condition of anonymity.
India does not want to rock ties with Russia as it wants access to nuclear reprocessing technology, price fixation of aircraft carrier Admiral Gorshkov and other defence deals.
Russia has been demanding an additional $2 billion (around Rs9,100 crore) for the warship after signing an agreement with India in 2004 to sell the refitted aircraft carrier, along with 28 MiG-29K fighter jets and other components, in a $1.5 billion deal.
While TPE said in an email response that it “had no relation to the contract (with NTPC)”, the Russian trade representative in India declined to comment and asked that TPE’s India representative be contacted.
Questions emailed on Thursday to TPE’s India representative and the Russian embassy in New Delhi were not immediately answered, and a text message sent on Wednesday to the former’s cellphone remained unanswered.
In an earlier email to Mint, the Russian embassy’s media and culture attaché had said: “Countries protect interests of their state and private companies abroad and the Russian Federation” is no exception.