Letters: Flawed assessment

The editorial, "A questionable principle" (January 15), takes a narrow view of Tata Power's successful bid for the ultra mega power project in Mundra, Gujarat, leading to inaccurate conclusions. Bidding presupposes distribution of risks between the purchasers of power and bidders. To say that no changes in law should be entertained is incorrect as this will lead to no one taking part in bids or bidders putting irrationally padded up prices - both unhealthy.

With the volatility in the economy there are areas beyond the usual changes in laws that can severely affect performance of a contract. The best practice the world over is to have a consistent and fair approach to resolve the claims to ensure large infrastructure investments are not wasted for want of resolution. How the impact of the resolution is to be shared by the project owners and buyers is where regulators have a role to play. Globally, investors see proper regulatory supervision and dispute resolution as key to deciding investment destinations.

We want to bring to your notice that despite the increase in input cost of fuel for the Mundra project, no increase in the tariffs has been possible due to a lack of mechanism for fuel cost pass through, thus making the project unviable. It is pertinent to highlight that the "reduction in coal price" that is mentioned in your article is nowhere in comparison to the 150 per cent increase from the time the project was conceptualised. A meagre decline of 10 per cent in the cost of fuel does not affect profitability.

The original bid was based on the fact that CERC had itself predicted a 3.5 per cent year-on-year increase. This did not happen. Therefore, the assessment on which the developers were expected to bid was flawed.

Shalini Singh,
Head, corporate communications, The Tata Power Company Ltd, Mumbai

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