NLC India Ltd. has adopted an innovative method of floating tenders for raising funds for a coal-based power project (3 x 660) at Ghatampur, Kanpur Dehat, Uttar Pradesh.
The project is pursued through a joint venture company called Neyveli Uttar Pradesh Power Limited — formed jointly by NLC and Uttar Pradesh Rajya Vidyut Utpadan Nigam Ltd. (UPRVUNL) — at an estimated project cost of ₹17,238 crore with the debt component working out to about 70 per cent of the project cost (almost ₹12,067 crore).
According to an NLC release, to secure the debt component, the company has adopted an innovative method of tendering, including reverse auction mechanism. A reverse auction mechanism is an auction approach to procurement or tendering, wherein sellers which meet certain minimum criteria are eligible to submit non-negotiable price bids.
The buyer (typically a utility) then selects sellers based on the lowest bids first, and signs non-negotiable standard contracts with the winning sellers, incorporating the prices bid by that seller, with the help of MSTC in which all major bankers and financial institutions participated and after the successful tendering method followed, a competitive rate of 9.35 per cent was secured for ₹4,200 crore.
Prior to this, the company resorted to traditional way of tendering and could secure an interest rate of 10.50 per cent. This new method is resulting in a saving of ₹460 crore over the tenor of the loan. The saving secured is expected to continue in getting the balance loan in due course of time. This may reduce the project cost significantly which would reduce the expected level of tariff, the press note said.
