New Delhi: NTPC Ltd, India’s largest power generation utility, is set to escalate its one-and-a-half year dispute with Russia’s Technoprom Exports (TPE), which had won the contract for supply of boilers to its controversial 1,980MW Barh project in Bihar.

High tension: NTPC’s Singrauli super thermal power station in Uttar Pradesh. The delay in the Barh project will affect the power utility’s plans to raise its generating capacity to 50,000MW by 2012. Harikrishna Katragadda / Mint

The utility plans to issue a legal notice to TPE after discussions brokered by diplomats and ministers in the background of India’s healthy relations with Russia failed to yield results. While the contract value is around Rs2,066 crore, TPE is adamant on an additional payment of Rs1,700 crore, citing higher steel prices.

“They (Technoprom) are not coming around. They are adamant and asking for compensation for which we are not ready. We will take contractual action according to the clauses laid down in the contract. We will issue (a) legal notice to them," said a top NTPC official who did not want to be identified.

NTPC is India’s largest power generation company with a capacity of 30,644MW. The delay in the Barh project will affect its plans to raise its generating capacity to 50,000MW by 2012.

The Russian firm had also sought relaxation of the delivery deadline and withdrawal of the 20% cap on price variation, attributing these to engineering, legal, and location-related issues.

Questions emailed to TPE on Thursday remained unanswered.

The Technoprom saga involves the Rs8,700 crore Barh power project that started in 1999. The Russian firm got a contract in February 2005 for the supply of boilers to the much-delayed project. However, work on the project stalled after a contractual dispute between NTPC and Technoprom, with the Russian firm demanding more money, citing higher steel prices.

“NTPC is right, this issue cannot drag on forever. There is a need for legal recourse. Beyond a point, this may result in a commercial hit for NTPC. They even stand scrutiny to regulatory oversight for not taking timely action," said Anish De, chief executive at Mercados Asia, an energy consulting firm.

Mint had reported on 19 December that India had relented on the contractual dispute between the two firms as Russia had linked the resolution of this issue to India’s request for a stake in the Sakhalin-3 oil field. This development followed the visit of Russian President Dmitry Medvedev to India in December although the stage for the resolution had been set earlier. Russia’s position on the deal was made clear to petroleum minister Murli Deora during his meeting with Russian Prime Minister Vladimir Putin in early November.

The contract is also being investigated by Interpol (International Criminal Police Organization) and the Indian Central Bureau of Investigations over allegations of bribery.

Russia’s energy minister Sergei Shmatko discussed with indian officials on 26 November issues related to the contractual dispute as well as the bribery allegations.

Following the thaw, and after Medvedev’s visit, discussions were started with the TPE team. The adjudicator, Anil Dev Singh, a retired chief justice of the Rajasthan high court, submitted his report on 28 November, asking for discussions between the two firms.