Petition No. 29 of 2007
Date of hearing: 8.11.2007

Talwandi Sabo Power Limited (TSPL) filed this petition on 10.7.2007 seeking approval of deviations from the Guidelines for Determination of Tariff by Bidding Process for Procurement of Power by the Distribution Licensees (Guidelines issued by the Ministry of Power, Govt. of India through Notification No.23/11/2004-R&R Vol.II dated 19.1.2005) including subsequent amendments. The petitioner company has been incorporated under the Companies Act, 1956 as a wholly owned company of the Punjab State Electricity Board (PSEB) with its registered office at The Mall, Patiala. TSPL is a Special Purpose Vehicle (SPV) for the establishment of a coal based thermal power plant of a contracted capacity in the range of 1620 MW -1980 MW to be set up at Village Banwala, District Mansa (Punjab), India on build own and operate (BOO) basis (hereinafter referred to as the “Project”).

The first hearing of the petition was held on 13.8.2007. The following order was passed by the Commission:

“The petitioner has stated that the RFQ has already been issued and the bidders who appeared in response have suggested certain modifications therein. It has been prayed that time may be allowed to file an amended petition after incorporating necessary modifications in the RFQ. The petition is adjourned sine die at the request of the petitioner”.

An amended petition was filed on 27.9.2007 seeking approval for deviations incorporated in the revised RFQ issued on 25.9.2007. This was followed by a fresh amended petition on 11.10.2007. In the meanwhile, the Ministry of Power, GOI issued revised standard bid documents and also further amended the afore mentioned Guidelines on 27.9.2007. The amended petition came up for hearing on 22.10.2007 when further information was sought from the petitioner.

The Commission notes that the petitioner has sought approval for effecting deviations in the Standard Bid Document pertaining to Request for Qualification (RFQ) annexed to the petition as Exhibit 7. In addition, concurrence has also been sought to the deviations made in the time table for the bidding process which after incorporating the amendments has been annexed as Exhibit 6 of the petition. Furthermore, the petitioner has also prayed for approval to the enhancement of capacity of the project from 1200 MW to contracted capacity in the range of 1620 MW to 1980 MW. The Commission notes with concern that despite a clear stipulation in the Guidelines referred to above, the petitioner has already issued the RFQ on 25.9.2007 without seeking prior approval of the deviations incorporated therein; nor have the compelling circumstances which dictated such a course of action been indicated. Notwithstanding this grave omission, the Commission has given its careful consideration to the grant of ex-post facto approval to the deviations keeping in view the provisions in clauses 3.1, 3.2, 5.16 and 5.18 of the Guidelines. The Commission’s findings on each deviation for which approval has been sought are discussed in the succeeding paragraphs:

1. Environmental Clearance:
   As per recent amendments in the Guidelines, the Rapid Environmental Impact Assessment (EIA) report should be available before the publication of the RFQ. The petitioner has submitted that the Rapid EIA Report will be available by Dec 2007. Furthermore, the Guidelines require that the proposal for environmental clearance must also be submitted to the competent authority before issuance of the RFP whereas the petitioner has sought approval for submission of this proposal by Feb 2008. The Commission observes that non-availability of the Rapid EIA report before publication of the RFQ would not in any way jeopardize the bidding process and accordingly allows this deviation with the stipulation that this report shall be forthcoming before the RFP is issued. In so far as submission of the proposal for environmental clearance to the concerned authority is concerned, the Commission appreciates that obtaining such clearance is a long drawn process which does not directly affect other time lines. Moreover, the stipulation for the environmental clearance proposal requiring submission before issue of RFP has been prescribed only recently in the amended Guidelines issued by the Ministry of Power on 27.9.2007, whereas the petitioner had issued the RFQ on 25.9.2007. In the light of the above, the Commission allows the petitioner to submit the application for environmental clearance to the concerned authority within 60 days of issuance of the RFP.
2. Data: The Guidelines require that the requisite hydrological, geological, meteorological and seismological data necessary for preparation of the Detailed Project Report (DPR) be made available before issue of RFP while the petitioner intends to do so by Dec 2007. The Commission is of the view that availability of the basic data is an essential requirement and any deviation on this account will be prejudicial to the bidding process. Accordingly, the Commission orders that the requisite hydrological, geological, meteorological and seismological data which is an essential input for preparation of the DPR be made available before issuance of RFP.
3. The amended Guidelines stipulate that a minimum of 45 days be provided for prospective bidders to respond to the RFQ, whereas the petitioner had initially allowed a period of 30 days only for this purpose. During the hearing of the petition on 22.10.2007, the petitioner, however, informed that the date for submission of responses to the RFQ is being extended from 24.10.2007 to 12.11.2007. With this extension, the prescribed requirement of the Guidelines is fulfilled and no deviation remains that might require approval of the Commission.
4. The Guidelines as amended on 27.9.2007 provide that RFP would be issued within a period of 75 days of the receipt of responses to the RFQ. The petitioner has, however, provided a period of 51 days only for this purpose. The time taken between responses to the RFQ and the issue of RFP is an internal matter concerning the petitioner only and does not otherwise impact on the bidding process. Accordingly, the Commission sees no difficulty in approving the deviation sought.
5. The Guidelines require that a minimum period of 150 days be allowed between issuance of RFP and the last date for submission of bids, whereas the petitioner has only provided 71 days for this purpose and sought approval for the same. The Commission observes that shortening of this period might affect the capability of some bidders in appropriately responding to the RFP. In that situation, there is a possibility of the extent of competition in the bidding process being reduced. For this reason, the Commission is of the considered view that shortening of this period is inappropriate and does not permit this deviation.
6. The Commission notes that the deviation in the title page (Page 1 of the RFQ document) wherein the words ‘Selection of Developer on Build, Own & Operate (BOO) basis through’ have been added is merely clarificatory in nature and is allowed.
7. The standard notice and RFQ documents require the procurer to enlist tasks completed before publication of RFQ. Clause 3.2 of the Guidelines further enumerates such tasks and stipulates the time by which these are to be completed. The petitioner has, in the RFQ and linked documents, indicated some of these tasks as ‘tasks undertaken’ rather than tasks completed. While doing so, it has been clarified that “The following tasks shall be completed before signing of the SPA with the successful bidder. However, the cost implications of all the activities required so as to enable the bidders in determination/calculation of tariff will be made known to them at the RFP stage. The tasks are:
   1. Project site identification and acquisition of land required for the Project
   2. Environment clearance for the Project
   3. Fuel linkage
   4. Water linkage for the Project”
   In respect of project site identification and acquisition of land, the Commission observes that project site already stands identified with the petitioner contending that the notification under section 4 of the Land Acquisition Act in respect of the site had been issued before the RFQ stage. The petitioner has further indicated that the notification under section 6 of the said Act for the land proposed to be acquired for the project would be issued in November 2007. In the light of the above status reported by the petitioner, the Commission notes that there is, at present, no deviation from the provisions in the Guidelines and that there is, therefore, no question of granting approval thereto. The issue of environmental clearance for the project has already been discussed in para (i) above. With the petitioner claiming that water requirement has been finalized, there is no deviation of the Guidelines/standard documents on this score either. As far as fuel linkage is concerned, Guidelines and the standard bid documents provide that the procurer would obtain the same before publication of the RFQ. While the petitioner has reported that approval of the Standing Coal Linkage Committee (Long Term) has been obtained for grant of Letter of Assurance, the Commission notes that it is not clear at this stage whether approval of the aforesaid Committee constitutes the final formal clearance in this respect. On the other hand it is also evident that the time table for obtaining final clearance for fuel linkage is not in the control of the petitioner and it may not be proper, therefore, to withhold the bidding process only on this account. The Commission, accordingly, permits deviation in finalizing fuel linkage which would be completed before signing of the Share Purchase Agreement with the successful bidder subject to the condition that the full cost implication of this or any other activity enumerated above is clearly made known to the bidders before the issue of RFP. Para 1.7 of the RFQ document is identical to the para incorporating “tasks undertaken” in the notice issued. The Commission’s conclusion as brought out above would be equally applicable to the deviation sought in respect of para 1.7 of the RFQ.
8. The Standard Documents specify that the period prescribed for the commencement of supply by the successful bidder will ordinarily not be less than 48 months. The RFQ document issued by the petitioner, on the other hand, provides for commencement of supply within 38 months and approval of this deviation has been sought. The Commission observes that the provision of 48 months for this purpose in the Guidelines would have been based on the general experience in the execution of projects of such magnitude in the country. It would, therefore, be fair to presume that some competent though smaller firms may not be able to meet this requirement even though they may be otherwise eligible and in a position to quote competitive rates. For this reason, the Commission is inclined to hold that this deviation should not be permitted as there is likelihood of the degree of competition being adversely effected.
9. Pages 8 and 9 of the RFQ document contain certain additional definitions in respect of power station, procurer, project, project site, successful bidder and Talwandi Sabo Power Limited or TSPL. These definitions though not featuring in the standard RFQ document are only by way of additional clarifications and are accordingly approved.
10. The petitioner has amplified the clauses in the standard RFQ document in respect of ‘clearances, consents and permits’ and ‘purchase of power’, both featuring on page 4 of the document. The amplification of the former clause has the effect of creating doubt as to the responsibilities cast upon the bidder as well as procurer in the matter of obtaining necessary clearances, consents and permits required for completion and operation of the project. As clarity in such matters is imperative, the Commission feels that the amplification made is unnecessary and is disallowed. The other change effected pertains to the clause regarding purchase of power. The standard provision is that the term of the PPA shall be 25 years whereas the petitioner has sought to qualify the same by stating that it could also be as stipulated in the RFP. The Commission observes that the term of the PPA appears to have been spelt out as a measure of comfort to the prospective bidders. Injecting an element of doubt as to the duration of this important contractual instrument would not be in the interest of the bidding process and is accordingly disallowed.
11. The Commission observes that the petitioner has sought approval of other changes as highlighted in the petition, whereas portions appearing on pages 5, 9, 10, 15 and 16 are in fact not deviations at all and require no approval.

    The petitioner has finally sought approval of the Commission to enhance the capacity of the project from 1200 MW to a contracted capacity in the range of 1620 MW – 1980 MW. The Commission notes that it had earlier allowed the petitioner to contract capacity to the extent of 2400 MW, while capacity for which the RFQ has been issued is within the permission already given.