The government has asked the apex power sector planning body in the country, the Central Electricity Authority (CEA), to draw up a model contract that state-owned?firms can use when they contract out the setting up of hydroelectric projects in an effort to address delays in many of these—usually a result of a contract disputes between the companies and contractors.
Streamlining processes: The Tehri project in Uttarakhand. Many hydroelectric projects have been delayed because of reasons as varied as late investment decisions, land acquisition problems and geological issues.
“We are concerned with the delays in projects due to contractors. In order to tide over the problem we have asked CEA to come up with a draft model contract which will be used by all PSUs (public sector undertakings) while awarding work contracts for their projects. The model contract will be ready in a few months,” said a senior power ministry official who did not wish to be identified.
Once ready, the model contract will be used by PSUs such as the National Hydroelectric Power Corp. Ltd (NHPC), North Eastern Electric Power Corp. Ltd, Satluj Jal Vidyut Nigam Ltd, Tehri Hydro Development Corp. Ltd and NTPC Ltd, which are setting up hydro projects in the country.
However, not everyone is convinced that the model contract is the solution.
“I do not think it is such an easy solution as every contract will have its own set of limitations,” said a senior NHPC executive who did not wish to be identified.
Contractors that work on hydroelectric projects in India include Patel Engineering Ltd, Jaiprakash Associates Ltd, Hindustan Construction Co. Ltd and Gammon India Ltd.
“Once a work contract has been awarded, any geographical surprises such as floods and landslides require new work to be added. This leads to changes in design. This is where the problem starts with fresh rate negotiations leading to project delays,” said a senior executive with a contractor who also did not wish to be named.
While the average time taken to develop a new hydroelectric project is around five years, many have been delayed because of reasons as varied as late investment decisions, contractual problems, land acquisition problems, geological issues and natural calamities.
Hydropower projects are more complex to build and need specialized technology and design compared with thermal power projects. Industry experts believe the problem has been compounded by the lack of good contractors.
“There is a dearth of good civil contractors in the country for the hydro projects. If there have been some disputes between the contractors and the project developers, the first step should be a proper analysis of the disputes and work out ways how to resolve it. I do not know whether standard template will work for all,” said K. Ramanathan, a fellow at the Energy Research Institute.
Of the country’s 135,000MW power generation capacity, only 32,000MW is generated from hydropower. India is seeking to add 78,577MW of generating capacity in the next five years—16,553MW of this will come from hydro projects.
Several hydropower projects have been delayed and India has met a little less than half the target of 14,393MW set for hydropower generation in the 10th Plan (2002-07).
In April, a study by the parliamentary standing committee on energy showed that the increase in project costs due to delays varied from 400% at the lowest to a maximum of 2,500%.
India’s largest hydropower company NHPC’s plans to take its capacity to 10,000MW by 2012 may come unstuck, with seven of its 12 projects being delayed due to a depletion of skilled personnel and rate disputes with private contractors as reported by Mint on 18 January.
“We are also concerned with the problems in enforcing contracts as a result of poor documentation by the utilities,” the power ministry official said.