Amid a raging political row, Tamil Nadu State’s power generating and distributing utility, TANGEDCO, has threatened to terminate the contract awarded in a coal-fired power project to Chennai-based BGR Energy Systems Ltd. (BGRESL), citing an inordinate delay in the commencement of the work for the project and breach of contractual obligations.
The BJP party in the State had raised questions about the rationale behind the decision to award the EPC contract to loss-making BGRESL.
BGRESL reported net losses of ₹479 crore, ₹178 crore, and ₹355 crore for FY23, FY22, and FY21, respectively. Its revenues stood at ₹806 crore, ₹1,221 crore, and ₹1,140 crore.
BJP’s claim
A couple of days ago, BJP Tamil Nadu president K Annamalai posted on the X platform that his party’s allegations over irregularities in awarding the EPC contract to BGRESL have been vindicated by TANGEDCO’s show-cause notice to the company over the delay and breach of contractual obligations.
A few years ago, TANGEDCO took up the expansion of the ETPS Expansion Thermal Power Project (1 x 660 MW). A Letter of intent (LoI) for an EPC contract was issued to Lanco Infra Tech Ltd. for a value of ₹3,921.55 crore. But the contract was terminated on April 9, 2018, citing poor performance of the company
A letter of award (LOA) for executing the balance works on an as is, where is basis was issued to BGR Energy Systems Ltd. on March 2, 2019. The project’s new Environmental Clearance was received from the Ministry of Environment, Forest, and Climate Change on December 11, 2019, and the LoI for the new contract was issued to BGRESL on December 12, 2019, for a value of ₹4,442.75 crore.
The State government’s Energy Department’s Policy Note for 2021–22 said: “An expenditure of ₹792.926 crore has been made so far on this project. TANGEDCO had earlier resolved to shelve the project. But, considering the demand in the future, it is proposed to re-examine the need for this project.
Interestingly, a new LOA was issued on March 9, 2022, for the same value to BGRESL.
With no commencement of the work relating to the project, TANGEDCO has now issued a show-cause notice to BGR to respond within 30 days as to why the contract should not be terminated.
The State power utility has said an LOA was issued in March 2022 to complete 82 per cent of the work project, of which the erstwhile EPC contractor had already completed 18 per cent. This project site was taken over by BGR on June 23, 2022, and as of that date, “it is observed that no appreciable progress of work is visible at the site even after a lapse of 450 days from the zero date of March 9, 2022.
TANGEDCO, in its notice to BGR, has highlighted various works relating to the project that were neither commenced nor initiated by the company.
“BGRESL, even after this enormous delay, has so far only started certain preliminary works, and so no single activity has been completed at the site since the date (June 23, 2022) of taking over the site.
It is regretted to inform that preliminary works like jungle clearance, opening of the site office, establishing an inward and outward weighbridge, establishing batching plants and stores, obtaining comprehensive site insurance, fixing sub-vendors for civil construction, etc. were not complete so far.”
As per the latest policy document of the energy department, the total revised value of the project is ₹6,381 crore, and the project should be completed by 2024–25.