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NTPC’s contract: behind the ‘fraud’

business Updated: Nov 24, 2009 22:37 IST
Anupama Airy
Anupama Airy
Hindustan Times
Highlight Story

Hindustan Times gets behind a controversial 1,980 mw, Rs 2,066 crore power contract and explains just what went wrong.

What’s news?

Based on a Central Bureau of Investigations (CBI) report, the ministries of power and external affairs have recommended the termination of a Rs 2,066 crore contract awarded by state-owned NTPC Ltd to a Russian contractor Technopromoexport (also known as TPE) to supply power equipment for NTPC’s 1,980 mega watt (mw) Barh Stage-I power project in Bihar.

Why the termination?

“Non-performance” and “fraudulent practices” by TPE, according to a November 18, 2009 Power Ministry note to Cabinet Committee on Security (CCS). “TPE has paid illegal gratification to unknown officials of NTPC and others through their Indian agent/facilitator to win this contract,” a Ministry of External Affairs note to Ministry of Power stated.

What are these practices?

CBI says TPE paid “illegal commission” of $21.9 million (Rs 100 crore) and Rs 3.33 crore to Ravina and Associates Pvt Ltd (RAPL), to secure this contract.

What’s illegal about this?

“RAPL was acting as an agent (in the disguise of local representative) for TPE,” the CBI note stated. As a local representative, RAPL should have got remunerated in Rupees. However, RAPL was paid on “pro-rata basis in foreign currency in a foreign account and not as a fixed remuneration in Indian currency.” This is a “misrepresentation of facts” and “is defined as fraudulent practice”.

Why is the government involved?

On every contractual issue raised by NTPC, TPE got diplomatic channels activated to settle scores, the CBI note stated. This contract became part of bilateral discussions between India and Russia with the Prime Minister and External Affairs Minister being repeatedly pulled into “unresolved issues”, raised by the “Russian side”. It was finally raised by the “President of Russia during his meeting with (Indian) Prime Minister on December 5, 2008,” the Power Ministry note to CCS says.

What does CCS have to do with a commercial dispute?

Following diplomatic failure to resolve the issue, the National Security Advisor (NSA) at a July 28 meeting asked the two ministries to put up a note before CCS on the “unresolved issues and the details of how the Russian side has raised this matter at the political level, including with the Prime Minister and Minister of External Affairs at various bilateral meetings.”

What is the NTPC’s position on the contract?

The NTPC board has approved termination of the contract.

What is CBI doing about RAPL?

“The investigation of the case is in progress,” the CBI note said.