New Delhi: In an attempt to complete its ill-fated Barh project in Bihar, state-owned NTPC Ltd wants India’s foreign ministry to impress upon the Russian government for extending $570 million fiscal support to JSC Technoprom Export (TPE), a key equipment vendor.

The issue with the potential of becoming a diplomatic snafu is being compared to India’s delayed acquisition of refurbished ex-Soviet aircraft carrier admiral Sergey Gorshkov, rechristened as INS Vikramaditya in November 2013, which tested India’s commercial and diplomatic interests with Russia.

The first phase of the Barh project became embroiled in a controversy after India’s Central Bureau of Investigation concluded that TPE breached its contract to supply boilers for the three units of 660MW each for 2,066 crore. The government, in the interest of India’s relationship with Russia, had then brokered a compromise between NTPC and TPE. TPE has now linked the completion of the project subject to the financial support by the Russian government.

“We have a problem," a top Indian government official said, requesting anonymity.

Even as India’s largest power generation firm extracted revised deadlines in 2011 from TPE, work on the project has stopped due to lack of supplies from the Russian vendor. The utility has approached India’s power ministry to take up the matter with India’s foreign ministry for approaching the Russian government.

TPE “expressed its lack of spare internal funds and inability to arrange the same. They had further stated that their proposal for fiscal support of $570 million has been forwarded to the Government of Russia and would require approval from ministry of power, ministry of finance and ministry of trade, Government of Russia. TPE had linked ordering of bought out items with additional financing from Government of Russia and informed that they had stopped negotiations/ordering with their sub vendors due to non-availability of funds," according to documents reviewed by Mint.

This will affect the commissioning of the first stage of the project that is to have a capacity of 1,980 megawatt (MW), enough to meet around half the power demands of Delhi. According to the revised timeliness agreed upon for the Barh project, the first unit of 660MW was to be commissioned by September 2013, the second 660 MW unit by March 2014 and the third by July 2016.

Spokespersons for the foreign ministry, NTPC and TPE didn’t respond to Mint’s query emailed on Thursday. Questions emailed to Russian Federation embassy in New Delhi on Friday remained unanswered.

The Barh project has a total planned capacity of 3,300MW. Of this, the second stage of the project with a capacity of 1,320MW is being constructed by state-owned Bharat Heavy Electricals Ltd and is expected to be fully operational by September 2014.

Interestingly, NTPC’s board was ready to terminate the contract. It was only after a presidential directive that a compromise was reached after Russian President Vladimir Putin and Prime Minister Dmitry Medvedev had helped hammer out a deal with the Indian government.

The genesis of the TPE controversy dates back to February 2005 when the Russian firm won a contract to supply boilers to NTPC’s 1,980MW Barh project. But work on the project soon stalled, with TPE demanding more money for the equipment citing higher steel prices.

The Russian firm wanted an extension and removal of the 20% cap on price escalation. TPE had allegedly violated the terms of the contract by engaging an agent, Raveena Associates.

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