NTPC cancels Barh deal with Russia’s TPE, encashes guarantees

NTPC has cancelled an over Rs 2,000-crore deal with Russia’s state-owned Technoprom Export (TPE) for supply of main equipment (boilers) to its 1,980 MW super thermal power project (STTP) at Barh in Bihar’s Patna district, due to inordinate delays and breach of contract terms by TPE. It has also encashed bank guarantees of R800 crore given to TPE and the deed of joint undertaking (DJU) partners, following a decision taken at the PSU’s board meeting on December 23, according to sources privy to the matter.

The PSU’s move is despite New Delhi trying its best to avoid such a fallout in the interest of India’s entrenched diplomatic ties with Moscow. The Barh Stage-I project has long been caught in row — at one stage, TPE was found by the CBI to have violated contract obligations.

Power ministry sources said NTPC has taken the action as the vendor was not only going slow on execution work but also giving it a runaround to press demand for settlement of extra financial claims, which had been rejected by the PSU. With the termination of the main plant package for Barh-I with TPE, NTPC is considering roping in TKZ, another Russian company, to ensure proper engineering and C&I interface of the steam generator. Negotiations between the two sides are already under way. TKZ is the qualified steam generator supplier of TPE.

The NTPC board stated that the actual accounting treatment of the amount received by encashing the contract performance guarantee should be decided by the management by taking the relevant legal, accounting and contractual provisions into account.

Sources said the involvement of TKZ would be necessary to complete the main plant package for Barh-I as the boilers designed by TKZ are “unique”. NTPC, they said, was planning to bring in the contractor to complete the equipment supplies and assist in erection and commissioning of the package.

NTPC, the sources added, would negotiate with TKZ for signing a fresh contract on a single-offer basis. The cost of the fresh contract will be “within the proportionate cost which is contractually payable to TPE”, on of them added.

The continuing delay in commissioning of Barh-I project had figured prominently in talks between Prime Minister Narendra Modi and Russian President Vladimir Putin last month in New Delhi.

With eyes on the upcoming Bihar assembly polls, the Modi government is keen to see the commissioning of the project that has been delayed by three years due to slow work by TPE, which had told NTPC that it would be able to complete the project in 2017 only.

Through all these delays, government sources said, TPE had raised extra financial claims of $248 million on the Indian power generator, which is on top of $190 million paid to it in 2010 towards increased inputs costs. The PSU had drawn the government’s attention to repeated shifting of commissioning dates by TPE.

Though the PSU had served termination notice to TPE earlier, the implementation of the same was kept on hold, hoping that the dispute could be taken up for resolution at the diplomatic level. The matter had even figured under the India Russia Inter Governmental Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation meeting in New Delhi last year.