MMTC scraps controversial coal tender

MMTC scraps controversial coal tender

State-owned trading firm MMTC Ltd has scrapped its controversial tender for the import of 12.5 million tonnes (mt) of coal valued at Rs6,000 crore for NTPC Ltd.

One of the bidders, Knowledge Infrastructure Systems Pvt. Ltd (KISPL), alleged foul play in the way the order was executed, and demanded an investigation into the procurement process and an intervention by the Prime Minister’s Office.

Other bidders for the 12.5-mt contract were Adani Enterprises Ltd and two consortia—Agarwal Coal Corp. Pvt. Ltd and Kowa Co. Ltd of Japan; and Dubai-based Coal and Oil Group (C&O), Coastal Energy Pvt. Ltd and Seapol Pvt. Ltd.

“We have scrapped the tender. We were given the option by NTPC to form the terms of the new tender, which we have done. This has now been sent to the commerce ministry for approval. We expect the approval to come shortly, post which we will float the tender any time shortly," said a senior MMTC executive who asked not to be identified.

While an Adani group spokesperson declined comment, a KISPL spokesperson said: “With the scrapping of the tender, the whole sector will benefit in general and NTPC will benefit particularly because there will be fair competition, which will lead to a fair price. Before we make specific comments, we would like to see what the revised terms of the tender are." The other two consortia could not be immediately contacted.

“We have discussed the issue in our board and have asked MMTC to follow the international competitive bidding guidelines along with those laid down by the Central Vigilance Commission (CVC). It is for them (MMTC) to ensure transparency. They will give us a certificate to the effect and even we will do our due diligence," said a top NTPC executive who did not want to be identified.

CVC is the apex body that oversees the functioning of government departments and agencies on contractual issues.

“Going forward, we will directly source the coal from overseas producers," the NTPC executive added.

Mint had reported on 5 August that NTPC, India’s largest power generator, planned to directly import the coal it needs, instead of asking state-owned trading firms such as MMTC and State Trading Corp. of India Ltd (STC) to import the fuel for it.

The change, which would have involved an amendment in internal rules, was prompted by the controversy.

The KISPL spokesperson had said in an earlier email that the conditions of the original tender were “against Central Vigilance Commission guidelines and standard public sector tenders" and that “the tender neither provides level playing ground for all the bidders nor does it seem to promote competition".

Dipesh Dipu, principal consultant, mining, at audit and consulting firm PricewaterhouseCoopers, said the procurement policies of government entities should be transparent and treat all bidders equitably, and also be seen to be so and do so. “The delay in importing coal in this case may be considered as sacrifice for compliance with these principles."

NTPC used 125 million tonnes per annum (mtpa) of domestic coal and 6.41 mtpa of imported coal in 2008-09. Indian coal has a high ash content, one reason why some domestic coal-based power plants mix it with higher quality imported coal.

The size of the market for imported coal that goes into power generation in India is around 20 mt a year, and is expected to double by 2012 as more thermal power projects come up.

Coal is critical for NTPC as at least 80% of its installed capacity of 30,644MW is coal based. However, a majority of its coal-based projects don’t have sufficient stock of coal.