Shimla: The cabinet came around to finally allot the contentious 960 MW Jangi-Thopan-Powari project to Brakel Corporation NV, an upstart company, after overturning an inquiry report of the power department that had recommended canceling the project allocation altogether.
The cabinet presided over by chief minister Prem Kumar Dhumal took the decision after the Dutch company made a forceful representation before a high powered committee headed by chief secretary Asha Swaroop, last week.
Overseas representatives of the investor group in the project were flown in to thrash out contentious financial clauses in the agreement before the government committee.
Late on Tuesday evening the state government handed out the following release approving the contentious project to Brakel Corporation:-
The Himachal Pradesh Cabinet in its meeting held here today accepted the recommendation of the Committee of the Secretaries constituted under the Chairmanship of the Chief Secretary to examine the issue relating to allotment of Jangi Thopan â€“ Powari Hydel Project to M/S Brakel Corporation NV.
The Committee of Secretaries were perused by the Cabinet and the following was noted in this context by the State Cabinet:-
a) The previous Government had created infirmities in the bid document whereby the lead member of the bidding consortium was not required to have any substantial financial standing.
b) When M/S Brakel Corporation NV made the tender bid alongwith its consortium partner, the previous government knew that M/S Brakel as the lead partner, did not have any financial strength. Even then, it overlooked this aspect and on the basis of one partner in the consortium i.e. Standard Bank, the financial strength marks were awarded even though no definite commitment of equity participation was made by the Standard Bank.
c) Cabinet further noted that the previous Government continuously allowed M/S Brakel to delay the required deposit of Up-Front premium. Further, contrary to the State Policy, the previous Government agreed to subject the proposed Implementation Agreement to International Arbitration which was completely against State interest.
d) Cabinet noted that the present Government firstly got M/S Brakel to agree that dispute would not be subject to International Arbitrations. Secondly, it imposed penalty of interest on M/S Brakel for delay in payment of the required Up-Front Premium of Rs. 173.42 crore. Thus alongwith this Up-Front Premium of Rs. 173.42 crore the company was also made to deposit Rs. 20.64 crore as interest for delay payment.
e) Cabinet further noted the advice of the Law Department and the views of the Committee of the Secretaries that because the previous Government had consciously overlooked the infirmities in the bidding process of M/S Brakel, and because legally a successor Government cannot put the blame for said infirmities now on M/S Brakel, it would now not be legally possible to back out from the allotment made by the previous Government, especially since in the eyes of law the contract has been established with the payment by M/S Brakel of the Up-Front and penal interest imposed by the present Government.
f) Keeping in view therefore the specific view of the Law Department and the views of the Committee of Secretaries constituted by the Cabinet in the matter, it was decided not to cancel now the allotment of the project made by the previous Government. However, Cabinet desired that HPSEB would need to change its bid document as well as technical evaluation procedure in future so that it does not allow financial bids to be opened of such parties which cannot display the required financial strength.