Neyveli might retender lignite to gas project
Whether it leads to a better outcome remains to be seen.
But Tamil Nadu-based Neyveli Lignite is thinking about re-tendering its project to convert lignite or brown coal to gas. Neyveli wants to convert lignite to gas under Phase-I or LEPC-1.
During Phase-II, or LEPC-2, it wants to convert the gas to industrial chemical methanol in line with a government directive that lignite and coal shouldn't only be used to generate electricity. L&T is the sole valid bidder for LEPC-1, quoting about Rs3000cr ($375m).
Before opening LEPC-1 price bids on January 5 (2024), Neyveli and project consultant Engineers India disqualified Megha Engineering and Petrofac, leaving only L&T. Additional coal secretary M Nagaraju tells this report that L&T's price bid was "236% higher" than the project estimate.
"In government, we can't accept this (high variation)," he says. "We are talking to them (L&T) and looking at all possibilities, including a retender."
An industry source is sceptical that L&T will reduce its price. Why would it, with its domestic monopoly in manufacturing gasifiers and related coal gasification equipment under licence from Shell and other global providers? "L&T knows it will get this (Neyveli) job at any cost," we hear.
"After all, the government created this monopoly situation for L&T." Because of Indo-China border tensions, Chinese companies are no longer welcome to bid for state-owned projects.
A July 23 (2020) order from the finance ministry's Department of Expenditure (DoE) forces companies from a country sharing a land border with India (Read: China) to register with Indian authorities and undergo rigorous defence and security screening. Our source adds that the only other company which is executing a coal gasification project in India is China's Wuhuan Engineering.
Wuhuan won a contract from state-owned Talcher Fertilisers in Orissa in March 2019 before the July 2020 finance ministry order. "Only companies like Wuhuan can compete with L&T locally in coal gasification," he stresses.
"But they are not welcome in PSU projects now." For the Talcher coal gasification project, Wuhuan quoted Rs4750cr ($678m), leaving rival L&T far behind with a quote of Rs7500cr ($1.07bn).