The Hindu Business Line : ‘PSU status hampers BHEL in bidding process’

Chennai, Sept. 17 Public sector power equipment-major BHEL may be sitting on orders worth Rs 1 lakh crore. But , its status as a PSU is making it difficult for the company to compete with private players in bidding processes, Mr Jairam Ramesh, Union Minister of State for Power and Commerce, said in a note to the Ministry of Finance.

The note observes that private developers of power projects do “no serious evaluation” of equipment with respect to life cycle costs, reliability and after sales service.

“While the initial tariff may be low, the performance of such equipment over a 25-year period is not given due consideration while selecting the equipment,” it says.

Pointing to a lack of transparency in equipment selection, Mr Jairam Ramesh says in the note that the power developers make their final decision of the equipment supplier or EPC contractor “without assigning any reason”.

No clarity

“The holistic picture of the impact of BHEL’s offer on the tariff is not discussed, leaving less room for any optimisation,” Mr Ramesh says. The Minister notes that there is no clarity on how comparison of various techno-commercial offers is made. He sites the example of the (2 x 500 MW) Anpara C project in Uttar Pradesh, where offers of the main plant package were submitted to Reliance and Lanco.

“Serious negotiations were held with these companies and most competitive prices were offered. There was no response from these parties and subsequently it came to our notice that the order for the main plant and equipment was already placed by Lanco in China. It appears that private producers seek offers from BHEL only for comparison purposes,” the note says.

Also, given the present procedures for PSU, BHEL is unable to tie up on an exclusive basis with any project developer. Offers are therefore given to various interested bidders. While the bidder takes the support of BHEL at the time of bid, no attempt is made once the order is secured.

Solution

The process of selection of the EPC/ Main Plant vendor through a process of transparent International Competitive Bidding has to be made mandatory with clear cut guidelines for evaluation of the bids based on life cycle cost, reliability and after sales service. “The subsequent tariff bidding should be decided only after fixing the equipment cost through ICB,” says Mr Ramesh.

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