The Hindu Business Line : NTPC’s investment powers nearing the limit

“Considering that NTPC shall be participating in competitive bids for UMPPs, the present limit of 30 per cent of net worth needs to be reviewed.” – Mr Jairam Ramesh

Mr Jairam Ramesh

M. Ramesh

Chennai, Aug. 28

NTPC, the country’s largest power generator, is close to hitting the limit of its powers to make investments autonomously.

This, unless reviewed, will seriously hamper the Navaratna PSU’s ability to participate in competitive bidding.

The existing rules say: “the ceiling on equity investment to establish financial joint ventures and wholly owned subsidiaries in India or abroad shall be 15 per cent of the net worth of the PSE in one project limited to Rs 1,000 crore. The overall ceiling on such investment in all projects put together shall be 30 per cent of the net worth of the PSE.”

NTPC’s net worth as of March 31, 2008, stood at Rs 52,638 crore; 30 per cent of this works out to Rs 15,791 crore.

NTPC has committed investments of Rs 11,423 crore. That means, there is not much room left for the company to participate in upcoming projects — mainly the ultra mega power projects.

In a note to the Finance Ministry, the Union Minister of State for Power and Commerce, Mr Jairam Ramesh, has said: “Considering that NTPC shall be participating in competitive bids for UMPPs and the projects being promoted by States, the present limit of 30 per cent of net worth needs to be reviewed.”

The note also points out that NTPC is handicapped in several ways in participating in bidding processes. For example, the power major is unable to maintain the confidentiality of costs in arriving at the bid prices – the company is required to open the quoted price of various equipment manufacturers in public.

Therefore the cost at which NTPC buys the equipment goes into public domain. In contrast, private sector players face no such constraints.

Also, while NTPC may enter into a ‘pre tie-up’ with a manufacturer before bidding, it has no freedom to give a commitment to the pre tied-up party that the equipment shall be sourced from it.

“This affects the seriousness of the prospective bidders and consequently the competitiveness of the prices quoted by them,” the note says.

Related Stories:
NTPC to invest $40 b over next 5 years
NTPC Q1 net dips 27% on higher expenses, interest cost

More Stories on : Power | Outlook | PSU | NTPC Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page