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Ministries clash over competitive bidding

The clash is over international competitive bidding for procurement of equipment for the ultra mega power projects, report Samiran Saha & Deepak Joshi.

business Updated: Nov 28, 2007 00:29 IST
Samiran Saha & Deepak Joshi

The ministry of heavy industries has opposed the power ministry's proposal to allow international competitive bidding for procurement of equipment for the ultra mega power projects.

The resistance stems from the fact that the ministry feels "it outrightly favours foreign suppliers vis-à-vis domestic vendors…. Providing further incentives under the mega power policy could lead to profit maximisation by captive power plants/merchant power plant, without the price reduction being passed on to the final consumer".

The ministry's claim has the backing of the National Manufacturing Competitiveness Council, which has pointed out that the present clause of 15 per cent price preference could be retained till various reform measures in the domestic tariff area were fully implemented for a level playing field between domestic and overseas equipment suppliers.

Expressing concern over the move to extend benefits under the mega power policy to captive power plant and merchant power plants, the ministry said: "These power plants have been categorised separately, specifically with a view to extend different benefits to them like freedom of tariff fixation even to the extent of charging opportunity cost. If accepted, the proposal could lead to a situation of a cost plus regime by-passing the regulatory commission."

Responding to the issue of a waiver being sought on the purchase preference policy, the department of heavy industry has pointed out that the power sector had been exempted from it since 2005-06.

"The exemption is, however, subject to the condition that the ministry of power will place certain orders upon BHEL on a negotiated basis, price benchmarkd through competitively bid projects every year," it said.

The ministry asserted that there is need for a well-defined mechanism for finalising the list of the projects based on super-critical parameters and their ordering in a particular year.

"The purchase preference policy, if applicable, should be uniformly applicable to all sectors, including power," the department added.

First Published: Nov 28, 2007 00:20 IST