Wseb May Call Off Bot Pact For Rammam Project

The West Bengal State Electricity Board (WBSEB) may scrap its build-operate-transfer (BOT) arrangement with the Indo-Canadian Power Consortium for its Rammam stage I hydel project in the state following an upward revision in the project cost. The SEB is exploring foreign funding sources to take up the project on its own. In all, five stages of power stations are proposed to be constructed on river Rammam in Darjeeling. The 51 mw stage II was taken up first and commissioned by the SEB.

An Indo-Canadian consortium was given the letter of intent in December 1996 on the basis of a price bid quoted by it. The letter of intent was aimed at giving the bidder an opportunity to quote a firm price after detailed investigation.

The consortium has since submitted its final report and raised the project cost from Rs 227 crore to Rs 310 crore. According to the earlier price bid, the average tariff worked out to Rs 2.14 a unit in the first 10 years. The revised project cost will double it to Rs 4.28 a unit.

On a 30-year projection, the average tariff rates are Rs 1.66 and Rs 3.10 a unit respectively. But the first 10-year average cost is important as the consortium proposes to recover its investment in 10 years and hand over the project to the SEB.

Negotiations between the SEB and the consortium have almost broken down as the SEB feels the revised price is unreasonable. It is sounding various foreign financial institutions to fund the project.

In fact, Voest Alpine of Austria has already told the SEB that it could arrange funds if it gets the equipment order. However, the government will not agree to such tied credit offers. But, the SEB also expects the Overseas Economic Cooperation Fund of Japan to step in once the sanctions are withdrawn. It took the SEB 19 years to complete stage II on account of fund constraints, difficult terrain and the political disturbances in the region in the last decade.

The experience led the board officials to decide that the other stages of the hydel projects should be handed over to the private sector on BOT basis. A tender was floated in 1993 which got no response. A second tender too failed to evoke any interest. The third tender, floated in 1996, got two bidders _ DLF Industries and the Indo-Canadian Power Consortium (ICPC) made up of the Birla Technical Services (BTS) of Calcutta and SMC Lebelin of Canada.

Initially, ICPC quoted Rs 180 crore while the DLF bid was for Rs 327 crore. Both soon revised costs to Rs 227 crore and Rs 231 crore respectively. The SEB selected ICPC for the project. However, ICPC was shaky about a firm price as it was to work in a hostile uncharted territory. So, ICPC and the SEB agreed that the final order would be placed after ICPC completed a detailed survey. ICPC then came up with a cost increase of Rs 83 crore at Rs 310 crore.

A small design change approved by the SEB can at best justify an increase by Rs 15 crore. ICPC has increased the cost on several heads. It claimed that earlier it had not calculated the profit on the EPC contract.

It has also justified cost hikes on grounds of risk factor and unforeseen events. After fruitless talks between the SEB and ICPC, Canadian experts are expected to join the talks shortly for a last ditch bid to reach a settlement.

The SEB thinks that taking up the project on its own will keep the cost to the minimum and the power will be much cheaper.