Come October 3 and the country is likely to plunge into darkness as NTPC diverts the states’ share of power to New Delhi for the CommonWealth Games (CWG). Delhi will require 5,000 mw for the Games. Damodar Valley Corporation (DVC), Indira Gandhi Super Thermal Power Project, Pragati Power Corporation and NTPC’s Dadri Thermal Power Station were to meet the requirement, however, except NTPC’s Dadri unit (2x490mw), none of the project have come up to power the Games.
While only a 490-mw unit of NTPC’s newly commissioned Dadri unit was supposed to supply power for the Games, the entire 980 mw generated will have to be diverted to Delhi during the CWG, said an NTPC official. According to the formula agreed upon, Uttar Pradesh was to get 5% of the 980 mw generated and 50% would have been distributed across the country. Delhi was to get 45% of Dadri’s generation. Even after drawing the entire generation of Dadri project CWG would fall short of 4,020 mw, to be managed from the states’ share of NTPC generation. This would violate the Gadgil power sharing formula, overdrawing from the grid, also virtually breaking grid discipline.
According to a Power Grid Corporation official, there are already instructions that the uniformity of frequency for supplying the common pool power to the north, east, west and north east India has to be broken during the CWG and power to north should flow at a higher frequency. In fact the eastern, western, northern and north eastern power zones’ power evacuation is done through a synchronised grid maintaining a uniform frequency level. So while power would flow at higher frequency to the northern part of the country, the grid connecting National Capital Region would overdraw from the northern grid to power the games. Hence, heavy load shedding is expected across the country, especially in the east, north, north east and west India during the Games.
However, the Central Electricity Authority is more eager to look at western India for drawing maximum power since it has the highest installed capacity of 51,454 mw of the country’s total 1,64,509 mw.
Being a clear case of breaking grid discipline in powering the CWG, it would be most interesting to watch the Central Electricity Regulatory Commission act to punish the Delhi government, which in turn would try to shift the blame on to the Centre, said the Power Grid Corporation official.
In fact, DVC was supposed to add 2,500 mw, Pragati Power Corporation 1,500 mw and NTPC’s Dadri 980 mw (but only 480mw meant for CWG) and Indira Gandhi Super Thermal Power Project 500mw to power the Games. And if this would have come to grid nothing had to be misappropriated for powering the games, a Power Grid Corporation official said.
The FE
Wednesday, 22 September 2010
Initiatives to exempt DVC from the purview of the electricity act
Union finance minister Pranab Mukherjee today told a Damodar Valley Corporation (DVC) event in Calcutta that the Centre would “consider granting” Rs 5,000 crore to the agency to complete its current and planned projects.
DVC officials told Mukherjee the corporation was facing losses because of “inadequate tariffs” fixed by the central electricity regulatory commission. They also requested him to take initiatives to exempt DVC from the purview of the electricity act so that it could fix its own tariffs.
DVC officials said the corporation was also involved in flood control and irrigation. “But the commission considers DVC just a power-generating agency,” an official said.
Telegraph
DVC officials told Mukherjee the corporation was facing losses because of “inadequate tariffs” fixed by the central electricity regulatory commission. They also requested him to take initiatives to exempt DVC from the purview of the electricity act so that it could fix its own tariffs.
DVC officials said the corporation was also involved in flood control and irrigation. “But the commission considers DVC just a power-generating agency,” an official said.
Telegraph
Friday, 3 September 2010
NTPC and Damodar Valley Corporation (DVC) might feel the heat
The government is set to make tariff-based bidding mandatory for allocation of power projects from next January, in a move that is expected to bring down the price of electricity to the consumer. However, state-run utilities like NTPC and Damodar Valley Corporation (DVC) might feel the heat, because with their limited ability to cut costs, they could easily be outbid by large private players.
The Centre and many states already follow the tariff-based bidding route for allocation of power projects even though it is not mandatory for them to do so. Under this mechanism, the player that promises the lowest electricity tariffs wins the bid. However, states currently have the freedom to allocate projects exclusively to the public sector units owned by them. This is called the MoU route.
Response from private players to tariff-based bidding has been very encouraging. For example, such competitive bidding held by the central government for four ultra-mega power projects (UMPPs) saw very aggressive offers from private players. That, in turn, helped keep tariffs for these projects low.
All the four UMPPs have gone to private players. NTPC, India’s largest power generator, could not bag even one UMPP. What is even more significant is that three out of the four UMPPs have gone to one company. It is, therefore, a foregone conclusion who will be winners if tariff-based bidding is made mandatory.
It is not that NTPC is not a cost-competitive power generator. The PSU’s drawback is that it does not enjoy the same level of operational flexibility as private players. If tariff-based bidding becomes mandatory, NTPC will be at a disadvantage vis-a-vis private players.
“NTPC has scope for further efficiency. It will have to pull up its socks if it has to survive in a competitive bidding regime,” former power secretary Anil Razdan said.
A private developer can persuade its equipment supplier to lower prices by promising higher volumes. That would, in turn, allow it the flexibility to make its offer more aggressive for allocation of power projects. A public sector company does not enjoy this kind of functional autonomy.
The original deadline for implementing the compulsory tariff-based bidding for allocation of power projects was January 2006. However, the government extended the deadline to January 2011 to allow more time to public sector power generators to prepare themselves for competition. But further extension is unlikely.
The CERC has advised the Centre to stick to the January 2011 deadline for the implementation of mandatory tariff based-bidding for allocation of power projects. The central electricity watchdog has made the recommendation on the basis of preliminary findings of a study being undertaken by it to assess comparative benefits of tariff-based bidding vis-a-vis cost-plus system. The CERC has told the government that its preliminary analysis suggests that tariffs being obtained through competitive bidding are lower than the levelised tariff under the cost-plus structure.
The regulator has further argued that this conclusion holds true even in cases where developers have to arrange all physical inputs and statutory clearances on their own. The commission is expected to complete the study soon.
“When there is acute power shortage, bidding is not helpful in bringing down electricity tariff. However, under normal circumstances bidding is good for both buyers and sellers,” PTC India chairman Tantra Narayan Thakur said.
The Centre and many states already follow the tariff-based bidding route for allocation of power projects even though it is not mandatory for them to do so. Under this mechanism, the player that promises the lowest electricity tariffs wins the bid. However, states currently have the freedom to allocate projects exclusively to the public sector units owned by them. This is called the MoU route.
Response from private players to tariff-based bidding has been very encouraging. For example, such competitive bidding held by the central government for four ultra-mega power projects (UMPPs) saw very aggressive offers from private players. That, in turn, helped keep tariffs for these projects low.
All the four UMPPs have gone to private players. NTPC, India’s largest power generator, could not bag even one UMPP. What is even more significant is that three out of the four UMPPs have gone to one company. It is, therefore, a foregone conclusion who will be winners if tariff-based bidding is made mandatory.
It is not that NTPC is not a cost-competitive power generator. The PSU’s drawback is that it does not enjoy the same level of operational flexibility as private players. If tariff-based bidding becomes mandatory, NTPC will be at a disadvantage vis-a-vis private players.
“NTPC has scope for further efficiency. It will have to pull up its socks if it has to survive in a competitive bidding regime,” former power secretary Anil Razdan said.
A private developer can persuade its equipment supplier to lower prices by promising higher volumes. That would, in turn, allow it the flexibility to make its offer more aggressive for allocation of power projects. A public sector company does not enjoy this kind of functional autonomy.
The original deadline for implementing the compulsory tariff-based bidding for allocation of power projects was January 2006. However, the government extended the deadline to January 2011 to allow more time to public sector power generators to prepare themselves for competition. But further extension is unlikely.
The CERC has advised the Centre to stick to the January 2011 deadline for the implementation of mandatory tariff based-bidding for allocation of power projects. The central electricity watchdog has made the recommendation on the basis of preliminary findings of a study being undertaken by it to assess comparative benefits of tariff-based bidding vis-a-vis cost-plus system. The CERC has told the government that its preliminary analysis suggests that tariffs being obtained through competitive bidding are lower than the levelised tariff under the cost-plus structure.
The regulator has further argued that this conclusion holds true even in cases where developers have to arrange all physical inputs and statutory clearances on their own. The commission is expected to complete the study soon.
“When there is acute power shortage, bidding is not helpful in bringing down electricity tariff. However, under normal circumstances bidding is good for both buyers and sellers,” PTC India chairman Tantra Narayan Thakur said.
Ansaldo, BGR join race for NTPC ,DVC boiler supply
Competition is set to intensify for the Rs 9,000- crore bulk order for supply of boilers to NTPC's power projects with two more players—Ansaldo and BGR Energy—entering the fray in the fresh bidding. Only L&T Power and Bhel had submitted bids against the original tender issued by the public sector power major for the project.
NTPC had to scrap the original tender after L&T Power's bid was rejected on technical grounds in June, leaving Bhel as the sole contender for the project.
When NTPC issued original tender for the procurement of boilers in September 2009, Ansaldo had expressed interest in bidding for the project. However, it wanted two-month's extension in bid submission date. In a hurry to expedite procurement process, NTPC declined Ansaldo' request. As a result, only Bhel and L&T submitted bids.
The government has envisaged introduction of supercritical power equipment in the country through bulk orders by central utilities like NTPC and Damodar Valley Corporation (DVC) for their 12 th plan projects. Following a decision by the Cabinet Committee on Economic Affairs (CCEA) in January 2009, NTPC initiated tendering for the bulk procurement of eleven sets of 660 mw supercritical boilers and turbines. While nine sets of equipment will be used in NTPC's own projects, two are meant for DVC.
Bidders are required to have equipment manufacturing facility in India. To benefit from this policy, private players like Bharat Forge, L&T, JSW and BGR Energy are setting up manufacturing facility in technological collaboration with overseas partners like Alstom, Mitshubishi Heavy Industries (MHI) and Toshiba.
NTPC had to scrap the original tender after L&T Power's bid was rejected on technical grounds in June, leaving Bhel as the sole contender for the project.
When NTPC issued original tender for the procurement of boilers in September 2009, Ansaldo had expressed interest in bidding for the project. However, it wanted two-month's extension in bid submission date. In a hurry to expedite procurement process, NTPC declined Ansaldo' request. As a result, only Bhel and L&T submitted bids.
The government has envisaged introduction of supercritical power equipment in the country through bulk orders by central utilities like NTPC and Damodar Valley Corporation (DVC) for their 12 th plan projects. Following a decision by the Cabinet Committee on Economic Affairs (CCEA) in January 2009, NTPC initiated tendering for the bulk procurement of eleven sets of 660 mw supercritical boilers and turbines. While nine sets of equipment will be used in NTPC's own projects, two are meant for DVC.
Bidders are required to have equipment manufacturing facility in India. To benefit from this policy, private players like Bharat Forge, L&T, JSW and BGR Energy are setting up manufacturing facility in technological collaboration with overseas partners like Alstom, Mitshubishi Heavy Industries (MHI) and Toshiba.
Jharkhand request DVC to take over 5 districts for power distribution
Government of Jharkhand has requested the Damodar Valley Corporation to take over the distribution of power in the five districts of Hazaribag Koderama Gridih, Dhanbad and Bokaro.
DVC in its 591st meeting considered the confidential note of Government of Jharkhand and has decided to conduct a system study by engaging a consultant, which will be followed by expression of interest. The work of power distribution can be either on franchisee basis or through a joint venture route.
DVC is the only power company of the country which is doing the business of Generation transmission and Distribution of power in its areas as per DVC act.
According to a senior official DVC is already short of man power and it is not understood from where the manpower will come. The only alternative left for DVC will go for joint venture where the private company will earn all the profits and DVC will provide the necessary infrastructure at Governments expenses.
A senior official said on condition of anonymity that Jharkhand Government is giving its revenue earning areas on franchisee how shall it survive with the remaining loss making areas.
It may be mentioned that, DVC floated a host of tenders in last three years for adding 5,200 mw, of which 2,500 mw was supposed to have come up by March 2010 for supplying to the Commonwealth Games. But not a single megawatt has been added so far.
DVC, currently a 2,854 MW company, aimed at becoming a 10,000-mw company by 2012 and be the country's second largest power generator after NTPC.
Even banking on power from DVC for the Commonwealth Games has proved to be a bad bet, it is not under stood hoe Jharkhand Government is banking on DVC.
DVC in its 591st meeting considered the confidential note of Government of Jharkhand and has decided to conduct a system study by engaging a consultant, which will be followed by expression of interest. The work of power distribution can be either on franchisee basis or through a joint venture route.
DVC is the only power company of the country which is doing the business of Generation transmission and Distribution of power in its areas as per DVC act.
According to a senior official DVC is already short of man power and it is not understood from where the manpower will come. The only alternative left for DVC will go for joint venture where the private company will earn all the profits and DVC will provide the necessary infrastructure at Governments expenses.
A senior official said on condition of anonymity that Jharkhand Government is giving its revenue earning areas on franchisee how shall it survive with the remaining loss making areas.
It may be mentioned that, DVC floated a host of tenders in last three years for adding 5,200 mw, of which 2,500 mw was supposed to have come up by March 2010 for supplying to the Commonwealth Games. But not a single megawatt has been added so far.
DVC, currently a 2,854 MW company, aimed at becoming a 10,000-mw company by 2012 and be the country's second largest power generator after NTPC.
Even banking on power from DVC for the Commonwealth Games has proved to be a bad bet, it is not under stood hoe Jharkhand Government is banking on DVC.
Only suppliers with domestic manufacturing facility can bid for bulk supply orders to be placed by central utilities like NTPC and DVC
Private companies like Bharat Forge and L&T that are setting up power equipment manufacturing facilities under joint venture (JV) route run the risk of being at the mercy of their foreign technology suppliers for long, as the relevant agreements don’t provide them access to the know-why of the technologies.
Technological know-why is critical to absorbing a new technology and bringing down production cost.
The JVs are formed by these companies to benefit from the government’s policy designed to encourage domestic manufacturing capacity. Under these JVs, the Indian power equipment manufacturer will get the technological know-how from their respective foreign partners but not the know-why.
The government has stipulated the condition that only suppliers with domestic manufacturing facility can bid for bulk supply orders to be placed by central utilities like NTPC and Damodar Valley Corporation (DVC) for supercritical power equipment. The purpose is to encourage technology transfer for the indigenous power equipment manufacturing capacity.
That has forced international suppliers like Siemens, Alstom, Mitshubishi, Toshiba, Hitachi and Babcock & Wilcox to enter into technology collaboration agreements with Indian players to set up manufacturing facilities here.
However, the government’s policy does not mandate transfer of technological know-how under technology collaboration agreement. As a result, technology providers have excluded transfer of know-how from the scope of technology collaboration agreement.
Significantly, Bhel has been able to make improvement on original equipment procured from technology collaborators. This was made possible because it has access to both technological know-how and know-why.
The government has formulated the policy to expedite the pace of power generation capacity in the country. It is banking on private players to fill the gap in domestic demand and supply of power equipment. But given that private players will have to depend on their foreign partners for the supply of critical equipment, the government’s planning may go hay-wire.
Even if JV companies want to manufacture such equipment locally, it is unlikely they will succeed. It is because foreign partners who hold majority stake and management control of these JVs, may not encourage such moves.
Apart from Bharat Forge and L&T, BGR, JSW, Thermax and Cethar Vessels are also setting up manufacturing facilities for supercritical power equipment under the JV route. These companies are expected to make a combined investment of Rs 10,000 crore for setting up power equipment manufacturing facilities.
The government has envisaged introduction of supercritical power equipment on a large scale in coming years. Central utilities like NTPC and Damodar Valley Corporation (DVC) have been asked to issue tender for bulk procurement of supercritical equipment. While NTPC-DVC bulk tending for 660 mw units is underway, a similar tender for placing bulk orders for 800 mw units is likely to be issued soon.
What is more, these JV companies do not have the right to export power equipment to other countries. In case demand for power equipment sags in India, they will not be able to utilize their manufacturing capacity. That is a serious risk to their investment. Most of the Indian partners of these JVs are listed on the stock exchanges. That means investors who have bought shares of these companies are also exposed to the risks involved in investment made by them in JVs.
Technological know-why is critical to absorbing a new technology and bringing down production cost.
The JVs are formed by these companies to benefit from the government’s policy designed to encourage domestic manufacturing capacity. Under these JVs, the Indian power equipment manufacturer will get the technological know-how from their respective foreign partners but not the know-why.
The government has stipulated the condition that only suppliers with domestic manufacturing facility can bid for bulk supply orders to be placed by central utilities like NTPC and Damodar Valley Corporation (DVC) for supercritical power equipment. The purpose is to encourage technology transfer for the indigenous power equipment manufacturing capacity.
That has forced international suppliers like Siemens, Alstom, Mitshubishi, Toshiba, Hitachi and Babcock & Wilcox to enter into technology collaboration agreements with Indian players to set up manufacturing facilities here.
However, the government’s policy does not mandate transfer of technological know-how under technology collaboration agreement. As a result, technology providers have excluded transfer of know-how from the scope of technology collaboration agreement.
Significantly, Bhel has been able to make improvement on original equipment procured from technology collaborators. This was made possible because it has access to both technological know-how and know-why.
The government has formulated the policy to expedite the pace of power generation capacity in the country. It is banking on private players to fill the gap in domestic demand and supply of power equipment. But given that private players will have to depend on their foreign partners for the supply of critical equipment, the government’s planning may go hay-wire.
Even if JV companies want to manufacture such equipment locally, it is unlikely they will succeed. It is because foreign partners who hold majority stake and management control of these JVs, may not encourage such moves.
Apart from Bharat Forge and L&T, BGR, JSW, Thermax and Cethar Vessels are also setting up manufacturing facilities for supercritical power equipment under the JV route. These companies are expected to make a combined investment of Rs 10,000 crore for setting up power equipment manufacturing facilities.
The government has envisaged introduction of supercritical power equipment on a large scale in coming years. Central utilities like NTPC and Damodar Valley Corporation (DVC) have been asked to issue tender for bulk procurement of supercritical equipment. While NTPC-DVC bulk tending for 660 mw units is underway, a similar tender for placing bulk orders for 800 mw units is likely to be issued soon.
What is more, these JV companies do not have the right to export power equipment to other countries. In case demand for power equipment sags in India, they will not be able to utilize their manufacturing capacity. That is a serious risk to their investment. Most of the Indian partners of these JVs are listed on the stock exchanges. That means investors who have bought shares of these companies are also exposed to the risks involved in investment made by them in JVs.
Prime minister Manmohan Singh has given his approval on ouster of Biswas
Eight months after the Union power ministry ordered the ouster of Subrata Biswas from the post of Damodar Valley Corporation chairman following the Central Vigilance Commission's (CVC's) corruption charges against him, prime minister Manmohan Singh has given his approval.
The power ministry removed Biswas from the post of DVC chairman on November 27, last year after the CVC raised objections to his appointment through a letter dated October 20, 2009. Biswas was appointed chairman on October 14, 2009, ten months after Asim Barman retired from the post.
The Prime Minsiter's office on July 12 this year finally circulated a confidential note (PMO ID NO- 905/5/c/97/2009-pol-5) mentioning: "Prime Minister has approved the proposal of pre-mature repatriation of Shri Subrata Biswas, IAS.( KL: 85), Chairman, Damodar Valley Corporation to his parent cadre Kerala." (Fe has a copy of the note).
In fact, the Cabinet committee on appointments, headed by the Prime Minister himself, appointed Biswas as chairman without taking CVC clearance, which is mandatory for such ranks. The CVC wrote to the Union power ministry that there were three disciplinary proceedings against Biswas and that " it was not understood how the power ministry made such appointment without taking CVC clearance." Fe had reported this first on November 13, 2009.
Finally, in July this year, following the PMO's instructions, the power ministry has asked its chief vigilance officer (CVO) Devendra Singh to take additional charge of DVC replacing Biswas. This, according to a section of officials, is enough indication that the ministry will now dig into the irregularities that have been taking place in the statutory body.
In June, Manas Bhuian, the Congress leader of opposition in the West Bengal State Legislative Assembly, wrote to Biswas ( letter available with Fe) that there were irregularities going on in the tendering process for evacuation of ash and that two contractors " have been able to convince the DVC management to change QR (qualifying requirement)."
In fact, DVC has been floating a host of tenders since end of 2008 for adding 5,200 mw, of which 2,500 mw was supposed to have come up by March 2011 for supplying to the Commonwealth Games. But not a single megawatt has been added so far.
DVC was supposed to commission Chandrapura-7 (250 mw) and Chandrapura- 8 (250 mw) in September 2009 and March 2010 and units one and two (2x500 mw) of Mejia-2 in April and July, 2010.
But none of these units has come as yet though work orders for all these projects have been placed on time.
Officials said that there have been manipulation of all the tenders and at least 2000 work orders of various nature have been placed in the past two years on a single tender basis. Biswas prior to being appointed as the chairman was the secretary of DVC for five years.
The present chairman, Devendra Singh, when asked didn't want to comment on the irregularities.
However, a power ministry official admitted that all projects are behind schedule, including two units of Durgapur Steel Thermal Power Station (2x500 mw), one unit of Bokaro -A, units one and two (2x500 mw) of Koderma and units one and two (2x600 mw) of Raghunathpur. The power ministry will now push through these projects.
DVC, currently a 2,854 mw company, aimed at becoming a 10,000 mw company by 2012 and be the country's second largest power generator after NTPC.
But that's an impossible target now. Even banking on power from DVC for the Commonwealth Games has proved to be a bad bet, the ministry official said.
The power ministry removed Biswas from the post of DVC chairman on November 27, last year after the CVC raised objections to his appointment through a letter dated October 20, 2009. Biswas was appointed chairman on October 14, 2009, ten months after Asim Barman retired from the post.
The Prime Minsiter's office on July 12 this year finally circulated a confidential note (PMO ID NO- 905/5/c/97/2009-pol-5) mentioning: "Prime Minister has approved the proposal of pre-mature repatriation of Shri Subrata Biswas, IAS.( KL: 85), Chairman, Damodar Valley Corporation to his parent cadre Kerala." (Fe has a copy of the note).
In fact, the Cabinet committee on appointments, headed by the Prime Minister himself, appointed Biswas as chairman without taking CVC clearance, which is mandatory for such ranks. The CVC wrote to the Union power ministry that there were three disciplinary proceedings against Biswas and that " it was not understood how the power ministry made such appointment without taking CVC clearance." Fe had reported this first on November 13, 2009.
Finally, in July this year, following the PMO's instructions, the power ministry has asked its chief vigilance officer (CVO) Devendra Singh to take additional charge of DVC replacing Biswas. This, according to a section of officials, is enough indication that the ministry will now dig into the irregularities that have been taking place in the statutory body.
In June, Manas Bhuian, the Congress leader of opposition in the West Bengal State Legislative Assembly, wrote to Biswas ( letter available with Fe) that there were irregularities going on in the tendering process for evacuation of ash and that two contractors " have been able to convince the DVC management to change QR (qualifying requirement)."
In fact, DVC has been floating a host of tenders since end of 2008 for adding 5,200 mw, of which 2,500 mw was supposed to have come up by March 2011 for supplying to the Commonwealth Games. But not a single megawatt has been added so far.
DVC was supposed to commission Chandrapura-7 (250 mw) and Chandrapura- 8 (250 mw) in September 2009 and March 2010 and units one and two (2x500 mw) of Mejia-2 in April and July, 2010.
But none of these units has come as yet though work orders for all these projects have been placed on time.
Officials said that there have been manipulation of all the tenders and at least 2000 work orders of various nature have been placed in the past two years on a single tender basis. Biswas prior to being appointed as the chairman was the secretary of DVC for five years.
The present chairman, Devendra Singh, when asked didn't want to comment on the irregularities.
However, a power ministry official admitted that all projects are behind schedule, including two units of Durgapur Steel Thermal Power Station (2x500 mw), one unit of Bokaro -A, units one and two (2x500 mw) of Koderma and units one and two (2x600 mw) of Raghunathpur. The power ministry will now push through these projects.
DVC, currently a 2,854 mw company, aimed at becoming a 10,000 mw company by 2012 and be the country's second largest power generator after NTPC.
But that's an impossible target now. Even banking on power from DVC for the Commonwealth Games has proved to be a bad bet, the ministry official said.
CIL and Damodar Valley close to finalizing JV structure
The consortium of BEML, Coal India Ltd and Damodar Valley Corporation is understood to have reached at a settlement
over the equity structure of the joint venture company that will run the Durgapur-based Mining and Allied Machinery
Corporation.
In July, the consortium acquired the assets of the closed facility from the High Court appointed liquidator at a consolidated
sum of INR 100 crore.
According to sources in the consortium, as against the originally proposed equity structure of 48:26:26 between BEML, CIL
and DVC, the consortium partners have now settled for 50:25:25. However, the agreement is yet to be firmed up.
After acquisition of the assets (by the consortium), BEML had asked for a majority 51 per cent stake in the proposed venture.
The proposal was opposed by both CIL and DVC on the ground that such a move would convert the venture into a subsidiary
of BEML, thereby reducing the role of the partners to mere investors.
It now appears that by offering 50% stake to BEML, the consortium is trying to strike a middle path. In the new scheme of
things, both CIL and DVC would bring down their stakes below the critical 26%. Though BEML is being offered a higher
stake, the venture would not be regarded as a subsidiary of the mining equipment major.
According to sources, the latest proposal would also ensure that DVC and CIL two major users of mining and earth moving
equipment in the eastern region of the country can place orders with the venture on nomination basis. DVC is a major power
generation outfit with captive coal mines in the region.
over the equity structure of the joint venture company that will run the Durgapur-based Mining and Allied Machinery
Corporation.
In July, the consortium acquired the assets of the closed facility from the High Court appointed liquidator at a consolidated
sum of INR 100 crore.
According to sources in the consortium, as against the originally proposed equity structure of 48:26:26 between BEML, CIL
and DVC, the consortium partners have now settled for 50:25:25. However, the agreement is yet to be firmed up.
After acquisition of the assets (by the consortium), BEML had asked for a majority 51 per cent stake in the proposed venture.
The proposal was opposed by both CIL and DVC on the ground that such a move would convert the venture into a subsidiary
of BEML, thereby reducing the role of the partners to mere investors.
It now appears that by offering 50% stake to BEML, the consortium is trying to strike a middle path. In the new scheme of
things, both CIL and DVC would bring down their stakes below the critical 26%. Though BEML is being offered a higher
stake, the venture would not be regarded as a subsidiary of the mining equipment major.
According to sources, the latest proposal would also ensure that DVC and CIL two major users of mining and earth moving
equipment in the eastern region of the country can place orders with the venture on nomination basis. DVC is a major power
generation outfit with captive coal mines in the region.
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