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Finalisation of Engineering, Procurement and Construction Contract

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GOVERNMENT OF INDIA
MINISTRY OF POWER
SHRAM SHAKTI BHAWAN, RAFI MARG
NEW DELHI-110 001

New Delhi,
October 15, 1996

P. ABRAHAM
SECRETARY

Dear

Kindly refer to my D.O. letter No. 4/1/96-IPC-II, dated 28.6.96 regarding deadline for submission of DPRs by IPPs on the MOU/LOI etc., route wherein it had been, inter alia, stated that projects which have not yet finalised their EPC contracts should be required to go in for international competitive bidding (ICB) in selection of their EPC contracts. In case of IPPs which inform that their EPC contract has been finalised, the State Electricity Board should satisfy itself that it is indeed so and in case where it is not finalised, the SEBs should ensure that the ICB route adopted is transparent and proper.

2. In this connection, another important issue has been brought to the notice of the Govt. The Indian EPC contractors have represented that the methodology for evaluating the EPC bids are loaded against the Indian EPC bidders and they are being put to great disadvantage. The CEA requires the IPPs to submit completed project costs including anticipated inflation on the foreign exchange and the Indian Rupee portion of the cost. The IPP, therefore, insists that the EPC bidder provide the foreign exchange as well as the Indian Rupee prices, after taking into account inflation over the affected period. This works to the disadvantage to the Indian Bidder as the inflation rate in India is higher and the Indian Rupee is depreciating vis-a-vis dollar. However, since the private power policy permits adjustments for actual foreign exchange variations, a situation would sometime arise where lowest foreign EPC bid during bid evaluation may not ultimately lead to the lowest project cost.

3. In order to rectify this anomaly and to allow Indian EPC contractors a level playing field it is clarified that EPC bidders (both Indian and Foreign) are permitted by IPPs to bid in any currency (including Indian Rupees) and receive amounts in such currencies (or its rupee equivalent) at par with foreign bidders, if they so choose. For projects rectifying CEA’s techno-economic clearance, in case an IPP

does not follow this procedure and specify this clearly in the bid documents itself CEA would not entertain the techno-economic proposal of such IPPs. You may like to inform all the concerned IPPs.

With best wishes,

Yours sincerely,

Sd/-
(P. ABRAHAM).

All Chief Secretaries / Secretary (Energy) and
Chairmen of State Electricity Boards.
Copy also forwarded to :
1. Shri M.I. Beg, Chairman, CEA, New Delhi.
2. Shri R.K. Sinha, Secretary, Ministry of Industry, Nirman Bhawan, New Delhi.