After year tender of lowest bidder cancelled for PakalDul Power Project

The Chenab Valley Power Corporation has cancelled the offer of a consortium to construct 1000-MW PakalDul hydropower project citing “substantially high prices” quoted by the bidder. The consortium had emerged lowest bidder for the project last year.

An official said authorities at Chenab Valley Power Projects Private Limited (CVPPPL) on Tuesday cancelled the tender of the consortium of Mumbai-based Patel Engineering, Limak of Turkey and GoI owned BHEL citing substantially higher prices quoted by it in comparison to estimated cost worked out by the company.

“… it was found that even after the discount offered in the bid price by the consortium, a large gap of over Rs 300 crores exists between the bid price and the estimated cost,” reads the communication from CVPPPL to Patel Engineering Works, informing about cancellation of the tender.

Prior to the decision the CVPPPL had sought clarification from the consortium on higher bid prices following which the consortium had offered “certain discounts”. The offer, however, wasn’t found “reasonable” by the CVPPPL.

The “exorbitantly high and unjustified” prices quoted by the consortium for works including topographical survey, development of tunnel portal and installation and commissioning of TBM also finds the mention in the CVPPPL letter.

“By doing so you have not only made bid front loaded but have also tried to part financial mobilization of equipment thereby reducing requirement of mobilization advances to that extent which otherwise would have attracted interest and submission of bank guarantee…there remains a front loading to a large extent of Rs 600 crores,” reads the communication.

The consortium had emerged lowest bidder in February 2015 following which the CVPPL had said it would award PakalDul to it in a month’s time. That time the company had not raised any objection to the “high construction cost”.

A joint venture between State owned Power Development Corporation, National Hydroelectric Power Corporation and Power Trading Corporation, the CVPPPL would be executing three power projects – PakalDul, 600-MW Kiru and 520-MW Kawar on Chenab basin in Jammu.

Coming up at the cost of Rs 9000 crores on River Marusudar in Kishtwar district, PakalDul is the first storage schemes in J&K which is to be completed in 66 months once it is awarded.

“PakalDul is a Turnkey Contract involving various risks but the way your consortium has submitted the price bids, most of the risk elements are hedged against the owner. This may make the stakes of the contractor in the project very less. A large front loading of Rs 600 crores as part of the strategy adopted by the bidder raises doubts about capability of consortium and structuring of the price bid doesn’t infuse confidence about risk sharing capability of the contractor,” reads the communication.

The “arbitrary manner” in which the consortium had structured the price bid involving “unbalanced distribution” among various work components, large amount of front loading and hedging of risk against owner “doesn’t infuse confidence” on the consortium for successful completion of project works, the CVPPPL has cited among the reasons that led to cancellation of the tender.

“Therefore the company has decided to cancel the present turnkey tender and you are hereby informed that the subject tender is cancelled and the bank guarantee submitted by you towards bid security is being shortly returned,” the consortium has been communicated by the CVPPPL.

The Chenab basin corporation which was set up in 2011 hasn’t so far awarded any of the three projects for construction in past five years.

Authorities at CVPPPL said they have got environmental clearance for construction of Kiru for which the final tenders would be issued “soon” while asserting that the company was expecting to initiate tendering process for Kawar in next six months.  Both Kiru and Kawar are run-of-the-river projects on Chenab.

Of total 2100 MW power to be generated from three projects, J&K’s share shall be 1200 MW and the State would have first right of refusal for remaining energy from the projects.

As per the MoU, JKSPDC would have a share of not more than 49 percent while NHPC would have share of not less than 49 per cent in CVPPPL.